A call for evidence has been launched as part of stricter Whitehall initiatives focused on ensuring payments are made within 30 days to protect SMEs in supply chains
The government has today launched a call for evidence concerning how best to end the practice of late payments to small businesses.
Proposals to ensure that payments are made within a 30-day period include giving trade bodies from across specific industries a greater role in helping deliver actual improvements in performance.
Payment reform, both in terms of ensuring more timely payments and introducing mandatory ringfencing of cash retentions, have been a major focus for HVAC industry bodies. This focus has been stepped up in recent months following the collapse of Carillion in January and resulting concerns over lost payments not returned to sub-contractors.
Small business minister Kelly Tolhurst said that the call for evidence, which is open until November 29, was intended to tackle the practice of large companies abusing their position in the market at the expense of small businesses or individuals.
A particular focus of the consultation will be to consider how company Boards can introduce responsible payment practices through their entire supply chain such as by introducing or appointing a non-executive director to oversee prompt pay performance.
Other proposals put forward include pushing new technological approaches such as account software to assist groups to manage payments, as well as allowing trade bodies to bring attention to poor or good practice.
Central government has also committed to ensure that 90 per cent of undisputed invoices for services it has obtained through SMEs can be paid in five days.
Ms Tolhurst said that feedback was being sought on the issue of late payments as part of the government’s industrial strategy.
She said, “Over the past five years the amount owed to businesses in late payments has halved, but we will go further to make sure all of our small businesses are treated fairly.”
“Today’s new call for evidence will help us identify the most effective way possible to tackle this issue once and for all and ensure small businesses are on a level playing field with their larger counterparts.”
Mike Cherry, national chairman of the Federation of Small Businesses (FSB), welcomed the government’s announcement to try tackle an issue that he argued was the biggest challenge facing smaller companies.
Mr Cherry added, “The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed.”
He also welcomed a decision to ensure small business commissioner Paul Uppal, who is in a role created last December to tackle late pay issues, was more involved in the process.
The commissioner will also join the Prompt Payment Code’s Compliance Board to ensure a more joined up approach within government to tackle the payment issues. This was announced earlier this week by the business secretary Greg Clark.
Mr Clark also committed the Board to consider all complaints made around compliance through a regular review process – with greater notice also being given where signatories are removed to the code.
Additional reforms may also be introduced to expand the role of the small business commissioner, according to Mr Clark.