Page 24 - PWM2024_JULY-AUGUST EBOOK

BETTER BUSINESS

Issue with

late payers

Software provider Xero detailed in an early March
2024 set of quarterly data that at the end of 2023
small firms were holding unpaid debt valued at
£1.6 billion. The firm’s analysis is based on the
accounts of numerous small businesses that use its
software, by Adam Bernstein
T Jonathan Rush, knowledge counsel,
However, and interestingly,
he matter of late pay-
ment of debt, especially
Technology & Commercial
to those in print, is akin to
the nightmare of another
Transactions at Travers Smith, has
Trump presidency that
just refuses to go away.
to the government’s recent Payment
Accounting software provider seen something different. He refers
& Cashflow Review Report which
Xero detailed in an early March 2024 suggests that “the trend is actually
set of quarterly data that at the end of towards paying a greater percentage
2023 small firms were holding of invoices on time and also that the
unpaid debt valued at £1.6 billion. UK is not hugely out of line with
The firm’s analysis is based on the comparable EU economies.”
accounts of numerous small busi- He thinks that the situation may
nesses that use its software. have been driven in part by the
Among the other findings was the reporting requirements of the
worrying fact that small businesses Payment Practices and Performance the trade with that customer represents a high proportion of the supplier’s
were experiencing delays that aver- Regulations 2017, which require sales, the supplier will be under commercial pressure to agree [to less
aged 6.1 days beyond agreed payment larger businesses to publish statistics favourable terms]”.
terms in the last three months of on late payment.
2023. Even so, Rush reckons that while Fixes fail?
Xero isn’t alone in its findings. For the trend may be moving in the right Various governments have tried to fix this perennial problem. There was
years the Federation of Small direction, “the estimates of the total the Late Payment of Commercial Debts (Interest) Act 1998 which pro-
Businesses has been trying to deal sums of money involved suggest that vided businesses with the statutory right to charge interest and a fixed
with the problem and noted that in there is still a significant problem”. administration fee on overdue invoices.
2022 “52% of small businesses expe- It appears, from his standpoint, In April 2020, the law was amended to state that no payment term
rienced late payments”. that the current regulatory frame- longer than 60 days may be agreed if the creditor is an SME, and the debtor
work for late payment in the UK con- is not.
The problem outlined tinues to rely heavily – perhaps too Both Rush and Langley think that the Act can be effective. However, as
Nicola Langley, head of legal at the heavily – on “businesses voluntarily Rush points out, while it provides an effective remedy for late payment
BPIF, says that late payment has been deciding to ‘do the right thing’ by which the courts will enforce if none has been contractually agreed, “sup-
a concern for members for some paying on time and there is little in pliers tend not to sue unless the relationship with the customer has com-
time. In particular, she’s seen a trend the way of significant sanctions for pletely broken down.” Indeed, there have been few cases brought.
in recent years for “some customers businesses that choose not to do so.” And Langley concurs. While she sees suppliers with terms that include
wanting to move to 60- or 90-day And that goes to the nub of the clauses to charge contractual interest in the event of late payment, few use
terms, rather than the usual 30 days. matter as Langley sees it. She says it. However, she thinks that “the ability to charge interest should be consid-
This can put pressure on to suppliers’ that “a lot will depend upon the ered a useful tool, especially in circumstances where the business relation-
cashflow, and increase risk for the respective bargaining power of the ship has come to an end.” She adds that “one way to look at this is to
business.” parties. If it is a repeat customer and recognise that if you are giving a customer credit terms, you are effectively

24 PrintWeek MENA July-August 2024 www.printweekmena.com