Late payment fines: what does it mean for businesses?

Last month the Government announced new legislation that will see persistent late payers fined, as part of a plan to help small businesses.

The plan would enable the small business commissioner to fine companies that repeatedly delay payments, with businesses being obliged to pay suppliers within 30 days of receiving a valid invoice. Draft proposals would also limit invoice terms to a maximum of 60 days, reducing to 45 days in five years’ time.

As a business working with many SMEs, Bathgate Business Finance largely supports the draft proposals as they would reduce both costs and administration for businesses, while also improving cashflow.

Ian Adams, Director at Bathgate, said: “SMEs are the lifeblood of the UK economy, representing more than 99% of the total business population. Small businesses are disproportionately affected by late payers, as they usually have smaller cash reserves and are impacted more significantly by the additional labour of chasing late payments.

“These draft proposals will not only reduce the burden of cost and administration, but they will also improve cashflow and prevent businesses from closures driven by late payments.”

While supportive of the plans, Bathgate recognises the challenges being faced by businesses that may be hit with fines.

Tracey Hamilton, BDM at Bathgate, added: “Being required to pay invoices earlier will impact businesses working capital, potentially creating a need for additional funding. There is no detail yet on the cost of the fines, but businesses will need to find this additional money too, and all at a time when firms are also feeling the impact of rises in National Insurance.

“While the intent to protect businesses is positive there will be an operational and financial impact and businesses who have to offer credit terms, and those who have to meet them, will need to plan accordingly for this by identifying working capital solutions.

“Bathgate’s team specialises in finding the right working capital solution for its clients, building a close relationship to fully understand business needs and matching it to the right product or solution, even in the most complex and challenging situations.

“We work together as a team when reviewing working capital solutions, pooling our network and expertise and bringing new and alternative products and solutions to our clients, from asset and supplier finance, to revolving facilities and even own-book lending from The Bathgate Capital Fund.”

Will your business be affected by this new legislation? Contact Bathgate Business Finance now to review your working capital and plan ahead for the changes. Visit bathgatebf.co.uk, call 0151 625 7323 or email proposals@bathgatebf.co.uk