More than £23.4 billion in outstanding invoices is owed to small businesses across the country, a major study has revealed.
The research, published by the new Small Business Commissioner, comes as the Government commits to reform the Prompt Payment Code and crack down on late payment practices.
According to the report, late payments and delayed invoices result in the collapse of up 50,000 small businesses every year.
Accounting for two-thirds of UK private sector employment and more than half of business turnover, it means that much of the economy is held hostage by businesses who withhold payments months after they are contractually due.
These practices can severely impact the bottom line of those affected – leading to reduced investment and job creation, and in the worst cases, “job losses and business closure”.
The report comes after the appointment of the new Small Business Commissioner, Liz Barclay, who said she will “spearhead the national effort to crack down on delayed invoices”.
“We need a real culture change around business payments in the UK to take pressure off our phenomenal entrepreneurs. People who have already delivered goods and services have to be able to turn their attention to their next client and next order rather than chasing up late payments and worrying about their cashflow,” she said.
“By working with businesses and ensuring their concerns are listened to I hope to be able to deliver a payment regime that keeps cash flowing and works for everyone.”
Commenting on the campaign, Small Business Minister Paul Scully added: “Having run small businesses for most of my professional life I know just how toxic delayed invoices can be, causing needless uncertainty as business owners chase payments which should have been made weeks or even months ago.”
The Government also revealed earlier this year that the Prompt Payment Code will be revised to protect small businesses. Under the changes, the payment period will be cut in half from 60 to 30 days, while “finance Directors or CEOs will be required to take personal responsibility by signing the Code, acknowledging that suppliers can charge interest on late invoices”.
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