One of the great catch-22 of supply chain credit control is that the supplier is often a small business and the customer is often a bigger brand – putting the bargaining power firmly in the hands of the debtor.
So what happens when a dispute arises? Actually there’s already a clear procedure to follow, starting with a friendly reminder to the debtor that it’s time to pay, and ultimately ending with enforcing the EU Late Payments Directive and taking them to court to recover the full amount plus fees and interest.
However now, small business minister Anna Soubry and BIS want to create the new position of Small Business Commissioner (which some people are calling a ‘Late Payment Tsar’, although the post would not be limited to supply chain credit disputes).
The Commissioner would be available to provide advice to small businesses on everyday issues, so those who might be in business for the first time should not have to suffer due to a lack of knowledge or experience.
Crucially though, one entire purpose of the post would be to act as a mediator in supply chain credit disputes, in an attempt to resolve any such issues without the need to go to court.
Would it work? It’s hard to say – and the proposal is still at a very early stage, with BIS inviting the business community to help in the creation of the role, and in honing its remit.
The Federation of Small Businesses is among those to respond most promptly to the news, and has expressed its doubts over not just this proposal, but several of the other measures already introduced by this and previous governments.
National chairman John Allan said: “Recent FSB research found that only one in five (21%) of our members are confident the current Prompt Payment Code will be enough to address the UK’s poor payment culture.”
“In addition, the EU Late Payment Directive from March 2013 is simply being ignored by many large and multinational companies to the detriment of small businesses and the sustainability of their supply chain.”
He added: “It’s important to ensure that the new Commissioner has the confidence of the entire business community, a clear focus on tackling supply chain bullying, and sufficient powers to intervene and resolve late payment disputes in a timely and effective way.”
It remains to be seen exactly how the role may be revised before it is officially created – if that day ever comes.
For the meantime, small businesses can continue to rely on instruments like the Late Payment Directive, which sets out certain legal rights to expect payment on time in accordance with the agreed terms – and until a Small Business Commissioner exists who can step in, debt recovery firms like CPA will gladly fight your corner to make sure you get what you are owed.
If you would like to talk to a member of our team about credit control or debt recovery please don’t hesitate to get in touch on 0808 115 8933.