Calls for tougher measures to tackle late payment culture
A recent report by the Business, Energy and Industrial Strategy Committee (“BEISC”) has recommended that the Government introduce, amongst other things, a statutory requirement that companies pay their supplier’s invoices within 30 days.
The small business and productivity report published by BEISC on the 5th December 2018 has acknowledged that SMEs are crucial to the UK economy and states that SMEs must therefore be given the best chance of succeeding. The report goes on to state that the key to SMEs survival is being paid fairly and on time. The cross-party committee of MPs was therefore “disappointed” to find that many SMEs have failed as a result of being treated “disgracefully” by many larger companies who adopt poor payment practices. Evidence before the committee showed that in some cases suppliers were subject to standard payment terms of between 75 and 120 days when contracting with larger companies, and may even be paid beyond the agreed unfavourable terms.
The report concluded that the Government’s current efforts to kerb bad payment practices, such as the Prompt Payment Code, had proven ineffective and recommended the statutory 30 day payment terms as well as the ability for SMEs to fine late payers.
Whilst it remains to be seen what measures, if any, the Government will introduce, suppliers do have existing tools to tackle late payment of invoices.
The Late Payment of Commercial Debts (Interest) Act 1998 allows suppliers of goods and/or services to commercial customers to charge interest at a set rate on any overdue qualifying debt. The current rate is set at 8% above the Bank of England base interest rate.
Suppliers can also claim compensation of between £40.00 and £100.00 on each qualifying debt, as well as their reasonable costs incurred in recovering the debt. These measures can act as a useful deterrent to late payment as well as compensating suppliers for the delay in receiving their funds. The right to claim reasonable costs of recovery also means companies have easier access to seeking professional assistance in recovering their debt, as the costs of that assistance may be recoverable from the debtor.
Our Debt Recovery Team based in Southampton are experts in recovering unpaid commercial debts and can provide advice on your rights under the Late Payment of Commercial Debts (Interest) Act 1998. Contact us today on 0800 2800 421.
© Ben Millward – Debt Recovery Manager Southampton