B2B Payments

UK Chancellor Seeks Crackdown On Late Payments

late payments

Late payments continue to negatively impact small enterprises in the U.K., and the Chancellor of the Exchequer has stated that larger firms should have a director in place to help reduce delays. Elsewhere, late payments impact contractors focused on emergency repairs in the U.S. Virgin Islands after the 2017 hurricanes.

It’s been no secret that late payments have hurt smaller firms in the United Kingdom, and that as many as 50,000 of them shutter each year.

Amid various efforts to address the issue, Philip Hammond, the chancellor of the Exchequer, has said that, per his Spring Statement (and as relayed by the Financial Times), larger firms should appoint a non-executive director to reduce late payments. As the FT also noted, these larger firms must publish their payment practices when it comes to invoices.

The initiatives come as the Federation of Small Businesses (FSB) has estimated that four of five smaller firms have been paid late, and were owed an average of more than 6,000 pounds. Further, noted the Times, small companies have claimed that larger companies have extended payment terms through the last two years. Said the Confederation of British Industry (CBI), which represents larger companies, through a statement via Chief Economist Rain Newton-Smith: “If reporting encourages better behavior from firms, that should be welcomed.”

A study by Duff & Phelps has found that late payments are hitting enterprise productivity. As the firm said, “Our concerns follow recent research by Bacs Payment Schemes, which claimed that small businesses are facing a collective bill of £6.7bn per annum in outstanding payments owed by other companies – up from £2.6bn in 2017.” The cash flow issues add to daily stressors faced by business owners, the company added.

The Spring Statement comes after the FSB’s own data showed only 4 percent of U.K. business owners said they have seen improvement in the late payments landscape through the past two years. FSB Chairman Mike Cherry had said the Spring Statement should address the issue.

In individual company news, in the U.S. Virgin Islands, The St. John Source reported that the Senate Finance Committee voted last week to subpoena AECOM, a prime recovery contractor, after the company’s representatives did not show up at a hearing focused on delayed payments to contractors for FEMA-funded roof repairs. The hearing may come as soon as April 2.

Said Committee Chairwoman Sen. Donna Frett-Gregory: “What is really troubling for us this evening … is the fact that a contractor who is receiving $150 million of the funds that has come into this territory did not see it fit to have a conversation, and it’s not for a lack of reaching out.” The contract for the repairs is worth as much as $350 million, and is tied to the Sheltering and Temporary Essential Power program. “The program, however, is notorious for having an extensive inspections, review and approval process,” reported the site, which detailed the various steps of the months-long process that marks the payment cycle.

In testimony before the aforementioned committee, Adrienne Williams-Octalien, director of the Office of Disaster Recovery, noted that the system is a cause of payment delays. The territory’s precarious fiscal position, she said, makes it unable to front tens of millions of dollars in payments, placing the contractors at the mercy of FEMA’s reimbursement process. In one example, Michael Donnelly, president for government services of APTIM Corporation, said his firm was owed $27 million in outstanding invoices.

——————————–

Latest Insights:

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. In the November 2019 AML/KYC Report, Zillow’s Justin Farris tells PYMNTS how the platform incorporates stringent authentication without making the onboarding and buying experiences too complex.

TRENDING RIGHT NOW