Debt Recovery: New government commissioner to tackle late payment by businesses

Update: Holmes & Hills no longer offer a fixed rate debt recovery service. However, our specialist debt recovery solicitors are still available to offer advice, so contact us on 01206 593933.

Essex debt recovery solicitors, Holmes & Hills, comment on the government’s revived rhetoric on tackling the issue of late payment by businesses. The government estimates that small to medium sized businesses (SMEs) are owed £26bn in late payment for services and goods received.

Late payment of invoices is a big problem in the UK and many commentators argue that over recent years the problem has worsened, with big business being accused of demanding ever longer credit terms from their suppliers. Small business owners, and politicians, argue larger companies, including many household names, are taking advantage of their often far smaller suppliers, bullying them into accepting unattractive payment terms. For many of these suppliers, to refuse the terms of their large customers would mean to bring an end to their working relationship.

Under the Enterprise Bill, the Government plans to introduce a new small business commissioner with the role focusing on empowering small businesses. This is to include supporting small business in dealing with and combatting late payment and bullying in the supply chain. As well as large businesses imposing unfair credit terms on smaller suppliers, supply-chain bullying often also takes the form of large customers forcing smaller suppliers to cut their prices, sometimes to unsustainable levels.

In the Queen’s Speech it was also announced that a new small business conciliation service was to be launched, with the aim of supporting SMEs in settling disputes over late payment and unpaid invoices.

Anna Soubry, Business Minister, said of the effect of late payment on small businesses: “It limits their growth and productivity, and can put an otherwise successful business at risk.”

Unpaid invoices can cause a small business significant cash flow problems. Unfortunately, such is the buying power of large customers that many small business owners and managers are reluctant to complain about late payment or unpaid invoices through fear of risking future working relationships with the customer. In addition to the delayed receipt of monies owed, and making the situation for smaller firms more difficult still, banks are unlikely to provide small businesses with large overdrafts to cover outstanding invoices for a period of more than two months. With this term being shorter than the payment terms imposed by many large businesses, for some smaller businesses, supplying large customers is simply not feasible or sustainable, limiting their potential market and opportunities for growth.

In addition to the government’s own estimations, the Federation of Small Business, which represents over 200,000 small businesses, surveyed its members and found that a staggering 51% had experienced late payment in the preceding 12 months.

Any move by the government to tackle the issue of supply-chain bullying and the problem of unpaid invoices is welcomed. But it is imperative that any new commissioner set the task of combatting the trend of late payment and unpaid invoices be properly resourced and have the appropriate powers to have a practical impact.

The Late Payment of Commercial Debt (Interest) Act 1998 (the Act), was introduced (and amended) to support businesses in funding the cost of recovering debts and unpaid invoices, by providing for creditors to charge the debtor an amount to cover the reasonable cost of instructing a debt recovery solicitor to recover the unpaid monies.

Holmes & Hills Solicitors debt recovery in Essex offer a fixed fee debt recovery service that provides you the opportunity to recover your unpaid invoices for a fixed cost starting from just £50 +VAT. There is no commission to pay on monies recovered.

In addition, if Holmes & Hills is successful in recovering compensation in addition to outstanding amount (under the Late Payment of Commercial Debt (Interest) Act 1998), this may cover the full cost of our debt recovery services, leaving you with nothing to pay and your monies recovered.