Legislation Bows To Curb US Government Late Payments

In the wake of the government shutdown, several U.S. lawmakers unveil legislation aimed at getting government contractors paid in a timely manner. In addition, Canada struggles with its own late payment challenges, which hits gig workers and the smallest firms, according to a new Interac study.

Much attention has been paid in recent weeks to the impact of late payments across the pond, specifically in the U.K. However, in the U.S., there has been a bit of groundswell to curb the harm that such late payments may do to small businesses (SMBs) that work with the federal government.

As reported by Washington Technology, four U.S. representatives introduced legislation that would mandate shorter timeframes for contractor work done for the government. The legislation — which debuted from Representatives Troy Balderson (R-OH), Steve Chabot (R-OH), Jason Crow (D-CO) and Adriano Espaillat (D-NY) — is titled the “Accelerated Payments for Small Businesses Act.”

The terms would be limited to 15 days, half of the current standard contract payment window of 30 days. The bill would expand the shortened payment terms to all government agencies, well beyond the Department of Defense, where that change has already been made. It also comes in the wake of a government shutdown that stretched across five weeks, when SMB owners had to navigate sudden cash flow bumps and interruptions.

The legislation has already been endorsed by the Professional Services Council (PSC), a government contractor trade group.

“Accelerated payments can be a critical lifeline for small businesses [that] work in the federal marketplace, helping to provide access to capital and enhancing growth opportunities,” PSC Executive Vice President and Counsel Alan Chvotkin said in a release that discussed the legislation.

Oh, Canada, Too

Late payments serve as a stumbling block for smaller firms in Canada as well, where a survey from Interac said that as much as 71 percent of Canadian gig economy workers and micro-firms (businesses with fewer than five employees) “struggle to get paid on time, and spend valuable time chasing late payments.”

A full 58 percent of respondents to the Interac survey said that trying to resolve late payments serves as a drain on time and productivity. Another 58 percent of respondents said they have had to dip into personal accounts to keep their businesses afloat.

In the UK

There may be some firmer footing — and progress — when it comes to late payments in the U.K. SMB finance provider Funding Options reported that Small Business Commissioner Paul Uppal has recovered £3.4 million (more than $4,4 million USD) in late payments, with the bulk of that money (£3.1 million) recovered in the last six months. (The Small Business Commissioner position was created at the end of 2017 with the goal of helping smaller firms recover funds they are owed by larger firms.)

In a statement, Conrad Ford, chief executive officer of Funding Options, said that “the Small Business Commissioner is finally hitting its stride. That’s shown by the number of businesses it has now helped, and the money it has recovered.”

Also in the U.K., Holland & Barrett, which was criticized for late payments by Uppal, and for a “purposeful culture of poor payment practices,” said it is “addressing” the challenge. As reported, the company takes an average of 68 days to pay invoices, and 60 percent of those invoices were not paid within agreed upon and stated terms. The company said it has been reaching out to suppliers, and reviewing contracts, to improve its payments processes.