Government plans to ensure businesses pay suppliers on time are a positive step but require greater consideration of enforcement measures, according to the Chartered Institute of Credit Management (CICM).
Under the proposals, large businesses could be fined for failing to pay smaller suppliers on time, while company boards will be held accountable for supply chain payment practices. The government originally pledged to tackle the issue of late payments in October 2018.
A new fund to encourage businesses to use technology to simplify invoicing, payment and credit management will also be established.
CICM chief executive Philip King said he welcomed to the government’s call for evidence in tackling late payment but warned that while the possibility of increased powers for the small business commissioner is logical, the suggestion of fines and sanctions for transgressors will need further consultation.
The small business commissioner’s new powers could include compelling information and disclosure of payment terms and practices, imposing financial penalties or binding payment plans on large businesses found to have unfair payment practices.
King added that proposals to encourage SMEs to better utilise payment technology lack detail: “Much of what is included in the document from the Department for Business, Energy and Industrial Strategy (BEIS) is aspirational, and while those aspirations should be welcomed, it will be the detail that is now important.”
The call for evidence references the prompt payment code, which the government is seeking to further strengthen in the consultation.
“The CICM is already working closely with the small business commissioner and has long advocated the concept of transferring responsibility for the code to the commissioner in a phased approach.
“Since our remit changed to publish the names of those suspended from the code, businesses, politicians and the media have at last been able to see how the code is both a carrot and a stick in driving positive payment behaviours. If the code has struggled in the past, that has been principally down to lack of funding and a failure to understand its true purpose and its powers.”
The consultation also proposes a tougher approach to payment practices reporting. It is already a criminal offence for businesses not to meet their statutory reporting obligations.
“Obliging larger firms to appoint a member of the board with specific responsibility for late payment will support this and help late payment and the treatment of suppliers to move further up the boardroom agenda,” King said.
“If adopted in the right way they can help drive the change in culture that has been the objective of so much of our work in this area for many years. We need government to turn words into the right actions, and we need to continue to highlight that good credit management sits at the centre of so much of what is required to change that culture.”