Small Business Commissioner, Paul Uppal has proposed a new “traffic light” system, to help small business owners avoid doing business with repeat late payment offenders.
The new system will support smaller firms, by flagging up businesses that have a poor record of paying suppliers on time, and those likely to set longer payment terms.
As a result, this would mean smaller suppliers can make informed decisions, on who they want to do business with.
Since 2017, large companies have been required to report supplier payment records twice a year; however, the late payment issue continues to affect micro-businesses and the self-employed.
A recent study revealed that on average, a small UK business owner is owed £24,841 in late payments on any given day.
For small and medium-sized enterprises (SMEs), these late payments worth almost £25,000 equate to 11 months’ average staff wage, 37 months of mortgage payments or nine family holidays.
Subsequently, every year 50,000 small businesses fold due to cash flow problems.
The new system will allow the Government to see the payment data and flag businesses accordingly; companies that have a poor record or fail to report payment practices will receive a red light.
Moving forward as of autumn 2019, the Government has said that it will only award a public contract to companies that have demonstrated prompt payments to their suppliers.