Labor peer Lord Jonathan Mendelsohn, a member of the House of Lords of the British Parliament, has introduced a bill to combat late payments and to help make the small business commissioner more powerful, according to a release.
Almost 25 percent of a person or business’ insolvency is caused by issues related to late payments, and even if a company can take the hit, smaller businesses can be stymied by the process. Late payments can also be counterproductive in terms of productivity, and can also have other effects, like minimizing well-being and causing stress to business owners.
The Association of Accounting Technicians (AAT) is in the midst of a campaign to fight the problem, with three changes. First, it wants to make the prompt payment code in the country mandatory for companies that have over 250 employees. Also, payment terms should be cut in half, the AAT said, from 60 days to 30. Finally, the AAT argues for a simple financial penalty regime for parties that pay late habitually, which will be enforced by the small business commissioner.
Polling by YouGov in 2019 showed that 73 percent of MPs are behind the proposed regulations.
With that in mind, Mendelsohn introduced a bill that would set a statutory 30-day limit for settlement of all invoices, with the small business commissioner having the power to impose big monetary penalties on offenders.
The bill would also ban predatory payment practices, such as discounts for prompt payments or fees for onboarding and remaining on supplier lists.
“Late payment is crippling small businesses, while the U.K. economy is crying out for investment. By failing to tackle late payment, we are starving our small businesses of the capacity to act,” Mendelsohn said. “The recent huge escalation in outstanding payments shows that decades of promoting ‘culture change’ has only made things worse. This bill will tackle the issue once and for all with a package of measures that is operable, impactful and measurable.”
This isn’t the first time the issue has come up in the country; late payments shutter about 50,000 U.K. businesses each year. In 2019, Philip Hammond, the chancellor of the Exchequer, also spoke about the issues.