Monday 14th October, 2013

David Cameron has announced his intention to look into introducing late payment penalties in an effort to help small businesses. The news comes in response to a general failure of many businesses to voluntarily sign up to the Prompt Payment Code. Currently fewer than half of the FTSE 350 are signed up to the agreement and although it has been welcomed by SMEs , the policy has had little effect overall.

The Federations of Small Businesses has said that the difference between being paid late and being paid on time can mean the difference between employers being able to pay staff or not. The Prime Minister is looking to tackle this situation by raising the plight of smaller suppliers to a higher level, stating that it has to become "a core corporate responsibility which is taken seriously at the most senior levels".

In a slightly different approach the Business Secretary, Michael Fallon would prefer to steer away from fines, perhaps wary of putting too rigid regulation in the way of individual business strategies. Mr Fallon has stated that he'd prefer to make it more difficult to extend payment terms beyond 60 days. With businesses such as Marks & Spencer recently extending their terms to 75 days, and with 200 DPO rates not unheard of, this is something which many businesses would say would be a good place to start.

The impact of moving to e-invoicing has not gone unrecognised either. With a significant increase in the number of businesses adopting an e-invoicing programme, many with relatively easy to use supplier portals, this route is certainly becoming an increasingly attractive way to ensure fast, compliant payment methods. On top of that, the recent groundswell of interest in invoice financing methods and dynamic discounting implies that where there's a gap - and 200 DPO rates are a significant gap - industry and innovation will find ways to fill it.