It can be frustrating when a client pays late on their invoice, only for you to discover that you cannot easily enforce statutory interest charges and penalty fees that you should be entitled to under UK and EU law.
Meanwhile, businesses face paying additional costs to make use of invoice finance schemes, or to delay paying tax bills due to poor cashflow arising from overdue invoices.
But one entrepreneur has suggested that a new approach could kill two birds with one stone, by ensuring those penalty fees are collected automatically, and put towards the cost of schemes such as invoice finance.
SME owner Beatrice Bartlay tells online recruitment website Onrec that there should be guaranteed financial repercussions for late payment, and that the funds raised through these should go towards helping those SMEs whose cashflow has suffered as a result of overdue invoices owed to them.
“Any reforms to how late payments are treated should consider VAT-style fines, which are reinvested by the government into our country’s small businesses,” she explained.
“Fines levied on late payers should be given to those SMEs who are applying to the government for help through both grants and also Time To Pay, which is a service run by HMRC for those who are struggling to meet tax and National Insurance liabilities.”
While little was done to tackle late payments in the Budget, Ms Bartlay says this could change as soon as next year, as the efforts of the government and private businesses alike gather momentum.
“I firmly believe that any supposed weakness can be turned into an advantage, and the damaging effect that late payments have on business should be flipped into helping to support those who are knocked the most,” she concluded.