On 2nd October 2023, we saw significant government action on late payments. This plan has been rolled out a plan as part of a bigger picture called the Cash Flow and Prompt Payment Review.
When payments come in late, it’s not just a small hiccup. It’s a big deal that can stop a business from growing and even affect the whole country’s economy. Some folks say that sorting out this late payment issue could bring in an extra £2.5 billion every year for the economy. In this article, we’ll dig into what the government is doing about late payments and how it could change the way payments work in the UK.
We’ll also share some tips for small businesses on how to handle payments and keep the cash flowing even with these new changes around.
Understanding the Issue of Late Payments
Late payments are like that annoying leaky tap that keeps you awake at night. It’s a nagging problem for many small businesses across the UK. When a payment gets delayed, it’s not just an inconvenience. It’s a domino effect that can topple many plans.
Statistics Don’t Lie
The numbers tell a tale of concern. As of last count, small businesses were sitting on a mountain of £23.4 billion in outstanding payments. That’s a heap of money that could be fueling growth, paying bills, or just keeping the lights on.
Effects on Cash Flow
Cash is king in the business realm. Without it, things come to a standstill. Late payments choke the cash flow, making it tough for small businesses to manage daily operations, let alone plan for the future.
This isn’t the first rodeo for the government. They’ve tried to wrangle the issue of late payments before, but the problem persists. It’s like trying to catch a greased pig. Slippery and evasive.
The government’s got a fresh plan this time around. But before we dive into that, it’s worth understanding how deep the issue of late payments goes. It’s not just about the money; it’s about fostering a culture of prompt payments and respect in business dealings.
Government Action on Late Payments
The wind seems to be changing direction with the government’s latest actions to tackle the late payment saga. Let’s take a gander at what’s on the table.
Strengthening the Prompt Payment Code
The Prompt Payment Code (PPC) has been around, but now it’s getting a beef-up. This code is like a gentleman’s agreement, where big companies pledge to pay their smaller counterparts promptly. The idea is to shorten the payment terms to 30 days, which is a nifty move towards faster payments. But will the big guns play ball? Only time will tell.
Broadening Powers of the Small Business Commissioner
Now, the Small Business Commissioner is getting more muscle to flex. With broader powers, the commissioner can now throw more weight around to ensure that small businesses get their dues on time. It’s a step towards having a big brother looking out for the little guys in the business playground.
With these measures in play, the hope is to cultivate a culture of prompt payments. It’s not just about getting paid on time; it’s about building trust and reliability in business transactions. The government estimates that these steps could unlock a whopping £2.5 billion annually for the economy. That’s no small change and could be the lifeline many small businesses need to thrive and grow.
The fresh set of measures is a glimmer of hope, but the real test will be in the execution.
Implications for Small Businesses
The government’s new play isn’t just a show; it’s set to shuffle the cards for small businesses. Let’s dive into what these changes could mean on the ground.
Navigating New Payment Terms
With the Prompt Payment Code tightening the reins, small businesses might see quicker payments coming their way. The 30-day payment term is a breath of fresh air, especially for those who’ve been waiting way longer to see the colour of money. Yet, adapting to this new rhythm might need some tweaks in how businesses handle their invoices and payments.
The Small Business Commissioner’s Extended Reach
The Small Business Commissioner now has a longer arm to ensure small businesses get their dues. But it’s not just about chasing late payments; it’s about building a culture where paying on time is the norm. Small businesses can now have a sense of a stronger backing when dealing with bigger corporations.
Prepping for the Change
Change, even good change, can be a bit tricky to navigate. Here’s what small businesses could consider:
- Invoicing Timely: Getting invoices out promptly and making sure they’re spot-on.
- Following Up: A gentle nudge can sometimes get the payment ball rolling.
- Exploring Digital Solutions: Tools like invoicing software can be game-changers in managing payments.
The road ahead is looking hopeful with these government measures. Yet, small businesses need to do their bit to make the most of this change.
Digital Solutions to Late Payments
The digital realm offers a treasure trove of solutions for the age-old problem of late payments. Let’s glimpse at a few that could turn the tide for small businesses.
Embracing Invoicing Software
Tools like invoicing software aren’t just about sending out bills. They’re about keeping a tight ship when it comes to managing cash flow. With features like automatic reminders, tracking, and instant updates, it’s easier to keep an eye on the money coming in and going out.
Online Payment Platforms
In a world where everything’s going digital, why not payments? Online payment platforms can speed up the process, making it easier for clients to settle their dues with just a click. It’s a win-win, saving time and hassle for both parties.
Financial Management Apps
Smart financial management is the backbone of tackling late payments. Apps that help with budgeting, forecasting, and tracking expenses can be a boon. They provide a clear picture of the financial health of a business, helping to make informed decisions.
The digital wave is reshaping how businesses handle finances, making it easier to tackle challenges like late payments. As we wrap up, we’ll take a moment to reflect on the journey and how small businesses can march forward amidst these new developments.
Countplus Accounting: Your Financial Beacon Amidst Regulatory Waves
The government action on late payments is a solid step towards easing the financial strain on small businesses. With the Prompt Payment Code getting a makeover and the Small Business Commissioner flexing more muscles, the landscape is shifting in favor of small businesses. Yet, adapting to these changes requires a blend of understanding the new regulations and leveraging digital tools to stay on top of payments.
Navigating these waters might seem daunting, but there’s help at hand. At Countplus Accounting, we specialize in assisting businesses to adapt to such financial changes seamlessly. And to make the transition even smoother, we’re offering three months free to all new clients. It’s a win-win situation, aiding businesses to sail through these regulatory changes while keeping their finances in check. The road might have a few bumps, but with the right strategies and a reliable partner by your side, small businesses can hope for smoother financial journeys ahead.