Any business will experience difficulties if they have customers who don’t pay their invoices on time or at all and, particularly during these unusual and testing times, the impact of bad payment practices on small businesses can be significant.

It is estimated that small businesses in the UK are owed approximately £23.4 billion in late invoices. This will not only be affecting the cash-flow of those businesses but could also threaten their very existence.

With this in mind the government has recently launched a consultation to look at increasing the powers of the Small Business Commissioner (SBC) which could see the SBC given greater powers to more actively involve itself in the processes small businesses undertake to chase unpaid invoices. It is rumoured that the new measures being considered could include the power for the SBC to impose fines on parties who fail to adhere to their recommendations and or fail to stick to any agreed payment plan.

The SBC is an independent public body set up by the government to tackle late payment and unfavourable payment practices in the UK’s private sector. A small business is defined as any business with fewer than 50 staff.

It currently has no power to impose sanctions on those businesses that operate poor payment practices. However, the proposed powers under review in this consultation would potentially allow the SBC to:

1. compel the disclosure of information in connection with the investigation of a complaint;

1. issue an information notice, apply to the Court for an order enforcing that notice, and issue a civil penalty if the recipient of a notice does not comply;
2. issue a binding monetary award or payment plan where payment has been unfairly or unreasonably delayed/withheld; and
3. impose a fine where a respondent fails to pay an award or adhere to a payment plan (and if a business fails to pay the fine, the SBC will have power to recover it as a debt and claim the costs of its investigation).

These proposed powers and this consultation have been, broadly, welcomed as a positive development for small businesses. The British Chamber of Commerce has welcomed the government’s consultation with its Director of Policy, James Martin, commenting that “businesses will be encouraged by the government’s commitment to creating a culture of prompt payment. But the real test of any reforms will be whether anything changes for firms across the country struggling to manage their cashflow because of this issue. Chambers of Commerce will continue their work with government and the Small Business Commissioner to find ways to tackle this burgeoning issue.”

The consultation will close on 24 December 2020.

Here at Phillips we welcome any development that has the potential to help small businesses, particularly during this period where many businesses’ cashflows have been hard hit as a result of the pandemic.

We provide our business clients with pragmatic and proactive advice that helps establish processes and policies to mitigate against the risk of invoices being paid late or not at all. We further assist clients in pursuing unpaid debts, often without the need to issue formal Court proceedings.

If you or your business requires any advice or assistance with its debt recovery policies and procedures and requires advice regarding debt recovery-related matters, please do not hesitate to contact Simon Arneaud in our Dispute Resolution team by emailing [email protected] or by calling 01256 854667.

Alternatively, click here to go to our contact page.

Disclaimer

This article is current at the date of publication set out above and is for reference purposes only. It does not constitute legal advice and should not be relied on as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.