Late payments are a growing problem for suppliers across the globe. But in the UK, specifically, companies are seeing some of the worst of that trend. Some suppliers have reported buyers taking up to four months to settle invoices. The UK’s Institute of Directors announced last month that late payments are hampering economic growth and warned major corporations that regulation may soon hit them hard.
Now, those regulations are ever closer to becoming a reality. The Small Business, Enterprise and Employment Bill came before Parliament late last week, legislation that would allow regulators to punish companies for paying their suppliers late.
Government officials are looking to introduce a payment reporting requirement and encouraged comment on the matter with its discussion paper “Duty to Report on Payment Practices and Policies.” The paper sought input on whether authorities should demand information regarding invoices that have been paid within 30 days, and those that were paid over 60 and 120 days, with specifics as to the invoices that were paid late.
“These proposals would allow suppliers to compare different customers against a standardized time frame of payment,” Gov.uk says of the paper.
Government officials have taken B2B late payments to task as more data comes in about the serious nature of the late-payment epidemic. According to the BACS (formerly the Bankers’ Automated Clearing Services), as of July 2014, SMBs were owed outstanding funds totaling more than $60.5 billion.
While small- and medium-sized business may be championing a late-payment law, some experts note that there could be negative consequences from such legislation. According to a Spend Matters report on the issue, big buyers may stop doing business with SMB suppliers altogether, or negotiate unfavorable contracts with them.
Further, Spend Matters notes, corporations would be required to self-report these invoice settlement statistics and, at present, there is no suggested method to oversee those self-reports.