Page 24 - PWM2024_OCTOBER EBook

BETTER BUSINESS

The ongoing

issue

Xero isn’t alone in its findings. For years the
Federation of Small Businesses has been trying to
deal with the problem and noted that in 2022
“52% of small businesses experienced late pay-
ments”, by Adam Bernstein
T of invoices on time and also that the
he matter of late payment
of debt, especially to
UK is not hugely out of line with
those in print, is akin to
comparable EU economies.”
the nightmare of another
He thinks that the situation may
Trump presidency that
just refuses to go away.
reporting requirements of the
Accounting software provider have been driven in part by the
Payment Practices and Performance
Xero detailed in an early March 2024 Regulations 2017, which require
set of quarterly data that at the end of larger businesses to publish statistics
2023 small firms were holding on late payment.
unpaid debt valued at £1.6 billion. Even so, Rush reckons that while
The firm’s analysis is based on the the trend may be moving in the right
accounts of numerous small busi- direction, “the estimates of the total
nesses that use its software. sums of money involved suggest that
Among the other findings was the
worrying fact that small businesses there is still a significant problem”.
It appears, from his standpoint,
were experiencing delays that aver-
aged 6.1 days beyond agreed payment that the current regulatory frame- vided businesses with the statutory right to charge interest and a fixed
terms in the last three months of work for late payment in the UK con- administration fee on overdue invoices.
2023. tinues to rely heavily – perhaps too In April 2020, the law was amended to state that no payment term
heavily – on “businesses voluntarily longer than 60 days may be agreed if the creditor is an SME, and the debtor
The problem outlined deciding to ‘do the right thing’ by is not.
Nicola Langley, head of legal at the paying on time and there is little in Both Rush and Langley think that the Act can be effective. However, as
BPIF, says that late payment has been the way of significant sanctions for Rush points out, while it provides an effective remedy for late payment
a concern for members for some businesses that choose not to do so.” which the courts will enforce if none has been contractually agreed, “sup-
time. In particular, she’s seen a trend And that goes to the nub of the pliers tend not to sue unless the relationship with the customer has com-
in recent years for “some customers matter as Langley sees it. She says pletely broken down.” Indeed, there have been few cases brought.
wanting to move to 60- or 90-day that “a lot will depend upon the And Langley concurs. While she sees suppliers with terms that include
terms, rather than the usual 30 days. respective bargaining power of the clauses to charge contractual interest in the event of late payment, few use
This can put pressure on to suppliers’ parties. If it is a repeat customer and it. However, she thinks that “the ability to charge interest should be consid-
cashflow, and increase risk for the the trade with that customer repre- ered a useful tool, especially in circumstances where the business relation-
business.” sents a high proportion of the suppli- ship has come to an end.” She adds that “one way to look at this is to
However, and interestingly, er’s sales, the supplier will be under recognise that if you are giving a customer credit terms, you are effectively
Jonathan Rush, knowledge counsel, commercial pressure to agree [to less lending them money, and if they had to borrow that money from some-
Technology & Commercial favourable terms]”. where else, then they would be paying interest.”
Transactions at Travers Smith, has Rush thinks the same, noting that interest at the Bank of England base
seen something different. He refers Fixes fail? rate plus 8% and if no credit period has been agreed, payments will be
to the government’s recent Payment Various governments have tried to regarded as late after 30 days, quite a generous remedy.
& Cashflow Review Report which fix this perennial problem. There was He does emphasise though that “it is possible to oust the statutory right
suggests that “the trend is actually the Late Payment of Commercial to late payment if the contract contains ‘some other substantial remedy’
towards paying a greater percentage Debts (Interest) Act 1998 which pro- such as an express provision for lower rates of interest on late payment

24 PrintWeek MENA October 2024 www.printweekmena.com