Late payments situation getting worse for some SMEs

According to the ICAEW (Independent Chartered Accountants of England and Wales) late payments to SMEs are a bigger problem than they were a year ago.

Of the nine SME industries analysed, it said, six had reported that the problem of late payments was worsening.

The FSB (Federation of Small Businesses) too, has said that while there have been some improvements thanks to the efforts of the Small Business Commissioner Paul Uppal, late payments remain a major problem and research by Lloyds Bank Commercial released at the end of last month found that last year almost two thirds (62%) of SMEs that were being paid late “failed to chase up for fear of harming customer relationships” also cited time constraints as a significant factor.

The cost to small businesses has been considerable, according to research published by Hitachi Capital earlier this month. It estimates late payments have cost SMEs £51.5bn in the last year.

Its survey of 1000 businesses found...

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Proposal to strengthen sanctions for late payments culprits

Some 18 months since the appointment of Small Business Commissioner Paul Uppal to tackle the problem of late payments to SME suppliers by larger companies it seems that the situation has barely improved.

In fact, according to research published in June by Purbeck Insurance Services late payment problems have actually got worse for 27% of SMEs with some 30% reporting worsening cash flow problems.

In the first quarter of this year Mr Uppal’s department has overseen the removal or suspension of some 17 companies that had signed up to the Prompt Payment Code (PPC) but failed to meet its standards.

The five removed altogether included BHP Billiton, DHL and GKN Plc. Signatories to the PPC pledge, among other things, agree to pay 95% of all supplier invoices within 60 days.

In its most recent completed case in May 2019 the Small Business Commissioner (SBC) was approached by an SME over the failure by G4S to pay it an invoice for £31,880.49 despite having contracted to do so...

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First two companies named and shamed over late payment

In March the first company to be named and shamed by the Small Business Commissioner Paul Uppal over late payment to a SME was announced.

The Office of the Small Business Commissioner launched an official investigation into the payment practices of the Jordans & Ryvita Company.

Using his new powers for naming offenders the Commissioner investigated Jordans & Ryvita on behalf of small business Magellan Design Ltd, which was owed approximately £5,000. As a result, the money was paid together with a further £1,400 in late payment interest.

This week the results of a second investigation, this time into health food retailer Holland & Barrett, were revealed. It was launched after a complaint from an IT company, which had asked not to be named, over an unpaid invoice of £15,000. The invoice took 67 days to be paid, well outside the company’s contractual agreement of 30 days.

Mr Uppal found that Holland & Barrett had “a purposeful...

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Is HMRC buckling under the strain of too hasty IT and insufficient staff?

debt collection hmrc Mar 29, 2019

Does anyone love the taxman? HMRC is an easy target when it gets things wrong and equally when it seems to be altogether too prompt with reminders!

Earlier this year, for example, the website accountingweb reported an ongoing problem with HMRC charging for late tax return filings for trusts. It transpired that these are not as automated as personal returns and the information on the return has to be input or re-keyed by staff. As a result, even if the tax return is filed on time, any delay in inputting and the HMRC system will flag up a late return and send out a penalty notice.

But HMRC’s system has also been found to not have recorded payments on account on online personal accounts and on paper statements, allegedly a “widespread problem” according to the website.

Other examples have been staff ignorance of the NI (National Insurance) system as it relates to PAYE, of employment allowances, and even miscalculation of tax owed after statements have been...

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An update on the business rates and appeals fiasco

In August it was announced that HMRC had sent in approximately 25 staff to the Valuation Office to fix the business rates appeal portal, which had been repeatedly cited by businesses as being impossible to use.

As the only mechanism now available for appealing non-domestic rate revaluation, the portal has been cited as the chief reason for an almost 90% reduction in appeals since the 2017 revaluation and just before this blog was due to be posted an article in The Times reported that a Government survey has revealed that almost nine out of ten businesses in the first stages of making an appeal using the portal were dissatisfied or very dissatisfied with the new system.

In the meantime, the numbers of business failures, particularly in the retail sector has continued to climb; many attributing the rise in rates as a factor.

Altus Group, a ratings adviser, reported in August that bailiffs had visited 81,000 businesses because of business rates arrears – an average of 222...

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Are creditors and their lawyers using Winding-Up Petitions for debt collection?

I have written previously about short term thinking by businesses and the effect it has been having on their ability to plan ahead for the medium and longer term.

It has been affecting businesses’ ability to invest in capacity, efficiency and R & D as planning for growth. Instead, most SMEs seem to be focused on cash flow and immediate profits, in that order.

In the current uncertain economic climate short term thinking may seem to be a rational response by creditors seeking payment.

However, there is another, perhaps more worrying trend that I am seeing among creditors, many of them suppliers to SMEs. Larger companies owed money and their solicitor advisers are often pursuing debts by early use of a winding-up petition instead of speaking with their SME clients and if necessary helping them. Unlike most reporting which is about large companies delaying payments to SMEs, I am focusing on large companies’ aggressive debt collection from SMEs.

Sometimes it is necessary...

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