“It’s time to level the playing field for Britain’s small businesses” – Mazuma
Small business accounting specialist Mazuma has welcomed the government’s announcement of the toughest late payment laws in a generation but warns that the real test will be whether change happens.
The new measures, unveiled as part of the government’s Small Business Plan, aim to give the UK the strictest late payment rules in the G7.
This will see the introduction of stricter maximum payment terms, fines for persistent offenders and stronger enforcement powers for the small business commissioner.
It is hoped that the new regime will help to reduce the £11bn a year cost to the UK economy.
Mazuma says the move is long overdue, with late payments continuing to blight Britain’s SME – choking cashflow, stalling growth, and in some cases forcing businesses to close.
Lucy Cohen, founder and CEO of Mazuma, said: “Late payments aren’t just inconvenient, they can be the difference between survival and closure for a small business.
“We see first-hand how delayed invoices disrupt cashflow, prevent investment and force owners to spend valuable time chasing money instead of running their business.”
SMEs employ 16.6 million people in the UK and generate £2.8tr in turnover, according to the government’s own data.
However, too many are left at the mercy of larger customers and suppliers who dictate payment terms and delay invoices without consequence.
Equally bad, says Lucy, are many of the UK’s local authorities. Previous research by campaigning organisation Good Business Pays found that a third of Local Authorities paid more than 10% of their invoices late.
“Government across the UK should really be setting best practice, but too often our clients report that they are some of the worst payers.
“SMEs are the backbone of Britain, but they’re too often treated as the smallest voice in the room, by private and public sectors alike,” explains Lucy.
“This legislation is a welcome step, but we’ve been here before too many times, and previous government efforts to tackle late payments have failed to gain real traction.”
Mazuma says one of the biggest problems is the power imbalance in supply chains, where large firms use their size and influence to dictate payment schedules, leaving smaller suppliers with little choice but to accept unfavourable terms.
Lucy added: “We need to see real enforcement – a small business commissioner with teeth – not just good intentions.
“All too often, small firms have been told to ‘wait their turn’ when it comes to getting paid. That culture must change alongside this legislation announced in the Small Business Plan, not only because it’s fair, but because a thriving SME sector is critical to the health of the UK economy.”
Mazuma will be watching closely to see whether the new powers for the small business commissioner, including spot checks and mandatory payment term limits, are used robustly.
The firm also urges the government to ensure that fines for repeat offenders are substantial enough to act as a genuine deterrent, rather than a cost of doing business.