Posted: Mon 7th Jan 2019
The Small Business Commissioner has proposed the introduction of a 'traffic light' warning system to help small firms identify big companies that are likely to not pay on time.
Paul Uppal, who was appointed by the government to help small businesses deal with late payment, said the system would indicate repeated late payers with a red light allowing suppliers to avoid doing business with them.
New analysis by Lloyds Banking Group of more than 7,000 big businesses show 21% have an average bill payment time of over 50 days.
Overall, the average time taken to settle an invoice is 37 days and only 14% have payment terms of 19 days or under.
"There has been a requirement since April 2017 for large companies to report twice a year on their payment practices and performance, including the average time taken to pay supplier invoices," Uppal said.
"Some businesses have now created a number of reports whilst others still have yet to produce a single report. Our ambition is to help small businesses make more informed choices when deciding which larger businesses they are going to trade with.
"A traffic light system would be a simple and effective visual way of highlighting which larger businesses are paying promptly and are working in partnership with their supply chain."
While Uppal can help entrepreneurs get the money they're owed, he cannot fine persistent late payers.
Last month, MPs on the Business, Energy and Industrial Strategy Committee said they were "shocked by the extent of late payments" and called on the government to give the Small Business Commissioner the power to impose penalties.
Figures indicate that that up to a trillion pounds a year is tied up in unpaid bills and analysis of two million invoices by Xero showed that the average British small business is owed £24,841 in late payments on any given day.
Enterprise Nation has called on the government to make the Prompt Payment Code, which sets standards for best practice, mandatory for big firms, cut the recommended payment terms from 60 to 30 days and impose sanctions on those that flout it.