The clock is ticking for the end of Theresa May’s tenure as prime minister. In the U.K., a group is calling on May’s last few days to include action on late payments, a problem that has plagued many small businesses (SMBs).
The Federation of Small Businesses (FSB), reported the Irish Independent, is exhorting the outgoing administration to pass the reforms that were introduced in the spring, which would hold larger firms accountable for their payment practices, and strengthen the powers of the small business commissioner and the tenets of the Prompt Payment Code.
As has been widely reported, late payments have led to as many as 50,000 firms failing annually in the U.K. As a result, the Prompt Payment Code, among other initiatives, has stipulated that firms pay 95 percent of supplier invoices within 60 days. Some large firms, such as Rolls-Royce and Persimmon, have been spotlighted for late payments — out of 20 companies in all.
According to the Irish Independent, National Chairman of the FSB Mike Cherry said, “As Theresa May’s time in office draws to a close, we are now at crunch time for the promised late payments package we have worked hard with the government to secure. We are fast running out of time for the outgoing administration to secure this as their lasting and transformational small business legacy. What these firms need is one more push to get the changes that will turn the tide against this unjust and unfair behavior.”
Elsewhere in the U.K., specific to supermarket firms, MP Rachel Reeves — chairman of the Business, Energy and Industrial Strategy (BEIS) Committee — said companies should sign on to the Prompt Payment Code. As noted via a letter from Reeves to the retailers, only half of the country’s regulated supermarket chains have signed on. Hearings found that late payments have impacted the industry. Last year, the BEIS Committee said in its small business and productivity report that all SMBs should sign onto the code, and that there should be a statute in place to limit payment terms to 30 days.
Analysis from Xero shed further light on late payments’ impact to small firms — with effects being felt in Hong Kong as well. Just more than half of payments are made on time, according to the data. At the end of the year, nearly 14 percent of invoices owed to Hong Kong smaller firms — worth $7.8 billion HKD (nearly $995 million USD) — were still outstanding.
“Unfortunately, dealing with late payments is part and parcel of running a business,” said Xero Regional Director for Asia Kevin Fitzgerald in a statement, according to ComputerWorld HK reports. “If the money is tied up in late payments, small businesses struggle to maintain positive cash flow, raise the capital needed for investments and grow their business.
He continued, “Small businesses in Hong Kong are already being held back from growing and flourishing in the current trade environment, and it is likely to have a knock-on effect very soon, with business owners worrying about paying for basic expenses, such as rent.”
The trade war is also impacting late payments in Hong Kong, as American Express found that half of all payments between Hong Kong SMBs and mainland China still rely on transfers (89 percent of payments) and checks (67 percent).