Do you worry about getting paid for the work you have done? If you do, then you aren’t alone. Nearly a third of small business have reported in seeing an increase of late payments, and to tackle the issue the government is introducing tougher laws.
The new laws will encourage businesses to pay their bills on time and crack down on unfair terms when it comes to settling a bill.
Typically, smaller business are more approachable and would rather solve a problem than add to it. Small businesses won’t have a legal, or debt recovery department that can chase outstanding bills so when a bill hasn’t been paid it is usually a director or key employee that has the responsibility of chasing money. This takes up time and effort, and when there is a small workforce this can have a detrimental effect on business.
A new report from the Association of Chartered Certified Accountants revealed that businesses with less than 50 employees are twice as likely to have problems with late payments, compared to larger organisations. SMEs are also less likely to increase their workforce if they are faced with late payment.
Outstanding bills or non-payment can endanger a small business and it is important to try and overcome this problem. The government is introducing these new laws to show that the UK is a safe place to do business, and encourage economic growth.
The following measures will be introduced to tackle the problem:
- Consulting on ways to tackle poor payment practices
- New laws to increase transparency on the payment practices of large and listed companies and help change corporate payment culture
- Strengthen the Prompt Payment Code
- Leading by example on public sector procurement
Whilst these laws will help to solve the bigger problem, it is important for you as a business owner to take action for your own business as well.
You can’t always ensure you will get paid on time, but you can ensure that your business has protection that will help when it comes to recovering outstanding bills. A correctly drafted contract will outline your sales and operational processes, and can communicate to clients when you expect payment. Because it is legally enforceable it can also help you with any legal action that may follow.
In 2014 small firms accounted for 99.7% of all private sector businesses in the UK. Whilst they may not have the same financial status as larger businesses, they still need protection, and the best way is by having a good contract in place that will reflect your business intentions and put the company in a position of strength come a dispute.