Lords debate: late payment laws won’t fix power imbalance
Ahead of the Lords’ debate on late payments legislation this afternoon, SME funding expert Lisa Cleaver warns the changes will not shift the balance of power between large customers and small suppliers.
In practice, smaller businesses rarely challenge larger customers for fear of damaging the relationship.
Lisa Cleaver, COO of eCapital, commented: “Fines for late payments are a step in the right direction, but the issue will persist because, for an SME, challenging a big customer risks a relationship that takes years to build. Small businesses should not have to choose between getting paid and keeping a client.
“An act passed in 1998 gave small businesses the right to charge interest on late invoices, but most don’t. The answer is not to be braver about confrontation, it is to have the financial foundations in place so that a late invoice never becomes a crisis in the first place. By planning ahead, with tools such as invoice financing, business owners can help themselves avoid the pain of late payments.”