However, government has a range of measures in place to tackle late payment with the aim to address the imbalance in market power between parties, increase transparency and encourage better payment practices through culture change.
That's why BEIS appointed a Small Business Commissioner in December 2017. Paul Uppal leads an independent office in Birmingham [1] and is committed to supporting Britain's 5.7 million small businesses to resolve payment disputes with larger private sector businesses.
The Commissioner can consider complaints about payment issues within the supply chain between small businesses (with fewer than 50 staff) and their larger private sector customers (with more than 50 staff). The SBC provides general information and advice on payment issues, including how to take action if a payment is late and signposting small businesses to existing support. The Enterprise Act 2016 provides the Commissioner powers to publish reports if he believes there is evidence of unfair payment practices.
As of 2018, the amount owed to smaller businesses in late payments more than halved from the previous six years and there are further proposals being made to change the incidence of late payment. Government recently announced they will consult on strengthening the powers of the Small Business Commissioner to hold to account the minority of larger businesses who fail to make payments on time.
New powers could include compelling information and disclosure of payment terms and practices, imposing financial penalties or binding payment plans on large businesses found to have unfair payment practices and for the responsibility of the voluntary code of best practice - the Prompt Payment Code - to be moved to the Small Business Commissioner.
This will put tools to tackle late payment under one organisation, ensuring the Commissioner has the powers to affect culture change in unfair payment practices. The Commissioner commented: "I welcome any additional provisions which will strengthen the influence my Office has in tackling poor payment practice and levelling the existing playing field."
The Commissioner and his team are also working hard to support and educate small businesses about preventative measures they can take to ensure late payment doesn't become an issue for their business by working collaboratively with high street banks, alternative funding providers, fintechs, universities and key stakeholders on various campaigns to communicate these messages.
A survey carried out by the Small Business Commissioner in conjunction with Growth Street revealed that over 1/3 of UK SMEs experienced late or unfair payment practices from big businesses and more than 50% of all respondents answered ‘certain circumstances or factors' may result in companies being reluctant to take action against an unpaid invoice.
The Commissioner commented:"I ran my own business for 20 years and understand the impact late payment can have on business growth and investment, and the key findings in this survey highlight that small businesses tolerate late and non-payment due to a fear of reprisal. Through my role I am committed to keep the spotlight on this issue and instil confidence in the minds of small businesses."
To date the Office of the Small Business Commissioner has recouped just over £6 million in unpaid invoices for small businesses and the Commissioner has used his powers to ‘name and shame' Jordans & Ryvita, Holland & Barrett and G4S for their poor payment practices.
Although the Commissioner is identifying businesses that demonstrate poor payment practice, he also wants to highlight those who do pay on time and promote their good work to encourage best practice. He is already seeing positive changes through his engagement with large businesses which was demonstrated by the publication of his report on Holland & Barrett. As a result of the report, the company is now working with the Commissioner to improve and adopt better payment practices with its small business supply chain, this change in behaviour is helping drive a culture change in payment practices.
The Commissioner commented: "From my conversations with small businesses I have found that bad supplier relationships are tolerated for the sake of having an affiliation with a large brand, but large businesses need to take more responsibility and stop taking advantage of suppliers' goodwill.
"I will continue to be a champion for small businesses and I urge those affected by late or unfair payment practices to use our free complaint investigation service so I can take action to eliminate supply chain bullying and help create a better business environment where small businesses are paid promptly and can thrive."