AAT calls for decisive action on late payments
AAT (Association of Accounting Technicians) is calling on the government and large employers to take stronger action on payment of suppliers on time, to help support small and medium-sized businesses during the ongoing Covid-19 (coronavirus) pandemic, ahead of the chancellor’s announcement on measures to support self-employed people in the UK later today (Thursday 26 March).
Following the actions of large employers such as Morrisons, which is paying all its small suppliers immediately rather than under the usual 14 day payment terms, AAT is encouraging larger organisations to speed up payments to SMEs who may be struggling to deal with the ongoing financial risk posed by the crisis. This will help to reduce the negative impact of the crisis on small business and speed up their recovery.
Steven Drew, spokesperson for Informi, the small business advice and support service introduced by AAT, said:
“Small businesses are likely to be among the worst hit by the Covid-19 pandemic and, although there has been a significant package of support introduced by the government in recent days to help them cope – including Statutory Sick Pay relief, a 12 month business rates holiday for the hospitality and leisure sectors, small business grant funding and a new Business Interruption Loan Scheme – we’re disappointed this hasn’t been extended to addressing the issue of late payments. Resulting cashflow issues have a huge impact on the health and success of small businesses, causing almost a quarter of small business insolvencies. Even for firms that can absorb late payments, this can lead to stunted growth, damaging productivity and innovation, and ultimately stifling their opportunity to expand.
“That’s why we’re calling on all large businesses to do the right thing and ensure that they pay all their small suppliers within a 30-day limit. This will increase the number of small businesses who are able to stay afloat during the pandemic and enable them to bounce back more quickly in the coming months. Small businesses are the lifeblood of the UK economy and reducing the negative effects of this unprecedented event through prompt payments will ensure that many more of them are not only able to weather the storm of Covid-19, but also support the UK’s economy and help protect jobs during the recovery period.
“We’re also encouraging small business owners that may be struggling to cope with the sudden loss of business due to Covid-19 to reach out to customers and let them know the challenges they are facing, if they haven’t already done so. Additionally, they may also wish to talk to their landlords about taking a rent holiday or accepting reduced payment and check their business interruption insurance to see if they’re covered for this situation.”
As well as encouraging large businesses to act, AAT is also calling on the government to take steps to help reduce the impact of late payments on small businesses during the pandemic.
Steven Drew added: “AAT has long championed the issue of prompt payment; we were a signatory of the Prompt Payment Code (PPC) in 2016 and 89% of our invoices are now paid within 30 days. But now more than ever is the time for all of us to step up and do our bit to ensure the UK economy is able to weather the ongoing Covid-19 pandemic, and this includes government acting to minimise the effect on the UK’s 5.9 million SMEs. Strengthening the PPC by committing to a statutory 30 day limit on payment of all invoices would help to tackle what has been a persistent issue for small businesses around the UK, as well as relieving pressure on them during an already difficult time.
“Additionally, giving the small business commissioner power to impose large fines on the worst offenders would serve as an incentive for firms to pay their small suppliers promptly. We welcome the chancellor’s announcement in last week’s Budget speech that the Department for Business, Energy and Industrial Strategy plans to publish a consultation in the coming months on strengthening the powers of the small business commissioner. We’ll be contributing to this consultation as well as encouraging small business owners to participate.
“Ultimately, however, this is about concrete action that can be taken now. This includes government and businesses doing their bit to ensure a strong, thriving UK economy in the coming months as the UK addresses the Covid-19 pandemic, as well as during the recovery process.”
