The Government has announced a late payment crackdown, giving the humble invoice something it has not enjoyed for years: the possibility of being taken seriously. It may soon arrive at a large company’s accounts department without being trapped in a polite email chain until everyone involved has retired.
The proposals would give the Small Business Commissioner stronger powers to investigate poor payment practices, adjudicate disputes and fine persistent offenders. The overdue invoice may therefore acquire a very serious friend with a clipboard, a legal framework and an interest in prompt settlement.
There is still a distance between announcing reform and making it law, although that distance is often where corporate optimism goes to hide. A bill is not a vague suggestion for a future conversation. It is money owed to somebody who may need it before the next financial year develops a personality.
The Government says the measures would create the toughest late payment laws in the G7. That is an impressive superlative to place beside a proposed 60 day cap on payment terms for large firms paying smaller suppliers. Sixty days is apparently the point at which waiting stops being an administrative habit and becomes national policy.
The proposals also include mandatory interest on late commercial payments at 8% above the Bank of England base rate, plus compensation. Persistent late payers would have to explain their performance in annual reports, producing a thrilling new genre of corporate literature. The usual account of an unpaid invoice may now require several pages explaining why the finance system needed time to process the concept of money.
Construction firms are promised protection from the withholding of retention payments, although the Government is consulting on how that ban would work. This matters because cash flow is not an abstract economic river. It is the thing paying staff, suppliers, rent and the person who keeps discovering that the printer has stopped working.
The Government says late payments cost the UK economy £11 billion a year, while 38 businesses close every day because they are not paid on time. Those figures turn the familiar task of chasing an invoice into a national endurance sport, except the medal is replaced by a reminder email and the finish line keeps moving.
The invoice has not yet been paid, but it has been handed several new verbs: investigate, adjudicate and fine. If the reforms become law, the finance department may finally stop looking into it and start looking at the bank transfer. The invoice will not have found its voice. It will have found something more powerful: an audience that can read a balance sheet.
Source: GOV.UK.
