Tina McKenzie
Policy Chair of the Federation of Small Businesses
Late payments are shuttering small businesses every day. More stringent rules are needed to fix the payment culture and protect entrepreneurs.
For years, I have sat in rooms with fellow small business owners who tell the same story in different ways. A builder who waits three months for payment has to raid savings to cover wages. A designer who delivers work on time but is told the accounts department will “process it in the next quarter.” A café owner who stays open by taking out short-term credit while a large customer drags its feet.
Delayed payments cause businesses to close down
Our latest Small Business Index report shows that two-thirds of small businesses (68%) were hit by late payments between July and September, and a third (34%) said they had worsened. This is shocking, but unsurprising. Late payment shuts down 38 firms each day, and when I speak to entrepreneurs who have had to abandon plans because money they earned is sitting in someone else’s account, their frustration is palpable.
The Government’s late payment package marks the first real chance in decades to turn payment culture on its head, and it comes with a clear promise: creating the toughest framework in the G7. That is the right move, because anything less will leave us stuck in the same loop we have endured for years.
Implementing stringent rules on late payments
This summer, I helped launch the Small Business Plan, which commits the Government to legislating on late payment, so we have the toughest rules in the G7. The recent consultation was built on FSB’s proposals: board-level oversight, audit-committee scrutiny, strengthening the existing 60-day maximum payment period with no exceptions, automatic interest on late payments and clear reporting of payment performance in annual reports. We also want the Small Business Commissioner to have powers to investigate poor payers without needing a small business to make a complaint, and consequences for repeat offenders, including limits on access to public contracts.
Small businesses have carried this burden long enough — change is a long time coming.
