B2B Payments

UK Seeks Late Payment Enforcer, But Government Agency Delays SME Payments

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The U.K. has begun the process of finding a commissioner to focus on late supplier payments as small businesses continue to struggle with cash flow, but reports of the initiative were released alongside separate reports that found one government entity struggling to pay its own suppliers.

Reports by The Telegraph on Sunday (Feb. 12) said the U.K. government has begun its search for a new small business commissioner who will focus on relieving SMEs of the ongoing struggle of late payments. The Department for Business, Energy and Industrial Strategy created the position to help businesses caught in delayed and late payment disputes to resolve the matter. Secretary of State Greg Clark will make the final decision on who takes up the post, reports said, who will collaborate with various members of the business community, including the Federation of Small Businesses (FSB).

Mike Cherry, national chairman of the FSB, said whoever takes up the position should have direct contact with the nation’s 100 largest companies to discuss payment practices with small suppliers.

“From day one, the commissioner needs the authority to tackle the most underhand supply chain bullying tactics,” he said, noting that the FSB has evidence of some of those shady tactics, like last-minute invoice reviews to delay payment and “retrospective discounting of payments” by large conglomerates. Reports said the new commissioner will also be tasked with promoting a “culture change” in how large companies pay their small suppliers.

While the U.K. has made multiple efforts to reign in the issue of late B2B payments, separate reports on Monday (Feb. 13) said that the U.K.’s Ministry of Defense is struggling to pay its own suppliers.

According to Government Computing, the MoD is facing criticism from its suppliers for delaying payments due to ongoing upgrades to procurement systems. Reports said SMEs are particularly affected by the problem, and delays in the upgrades to the new system have forced some small government contractors to seek bank loans to manage cash flow.

Small businesses are reportedly complaining that their invoices are now two months past their due dates, despite warnings from the MoD issued in early December saying that delays could last only up to about two weeks. One government contractor told the outlet that some SMEs haven’t been paid since Oct. 2016, while the government agency hasn’t given word on when the issues may resolve.

The contractor said that suppliers are able to access Exostar, the platform through which suppliers submit invoices to the MoD, but the new eProcurement system cannot connect into Exostar for MoD admin to view and authorize those invoices for payment.

“So, as a result, we have not been paid for the majority work done in Q4 of 2016,” one vendor told the outlet. “I understand that we are not the only company experiencing these problems, and the impression I get from contact with ADS is that there are actually a large number of MoD suppliers who are in the same position.”

Daniel Jones, a GlobalData Public Sector senior analyst, said that these delays in payment disproportionately harm the smallest of government suppliers.

“However, this is a particular concern for the defense sector since many smaller firms engaged in this area are highly reliant on defense as their core market, as a percentage of overall revenue,” he explained. “In addition, the latest MoD SME policy set a target of increasing SME procurement spend to 25 percent by 2020. Timely payments underpin all efforts in this area, and continued delays will risk undermining both the MoD’s long-term goals and its reputation in the SME supplier community.”

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