Payment practices ‘must be published’ under Small Business Bill

  The Small Business, Enterprise and Employment Bill, introduced to Parliament at the end of June, sets out several measures that aim to improve small businesses’ access to finance.     Significantly though, this is not only in the sense of enabling SMEs to borrow money more easily – or even to borrow against outstandingRead More

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Payment practices 'must be published'
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The Small Business, Enterprise and Employment Bill, introduced to Parliament at the end of June, sets out several measures that aim to improve small businesses’ access to finance.

 

 

Significantly though, this is not only in the sense of enabling SMEs to borrow money more easily – or even to borrow against outstanding invoices, as has been the case in previous government efforts to help with SME cash flow.

 

Instead, part of the proposed legislation calls for bigger companies to publish their payment practices for public scrutiny, effectively allowing those with the worst payment terms for small suppliers to be singled out.

 

The BIS fact sheet on the ‘access to finance’ portion of the Bill says: “The aim of the measure is to incentivise businesses to improve their payment policies and practices so that there is competitive pressure to improve payment practices in line with peers.”

 

It also calls for payments to be “processed more efficiently” – which is probably another way of saying the total time taken to settle business invoices should decrease, rather than other interpretations of ‘efficiency’.

 

BIS explain that the need for greater transparency over payment practices was mentioned multiple times by respondents to a recent discussion paper, in a climate where SMEs are owed just over £30 billion in overdue payments, mostly by their larger company counterparts.

 

The measures will make large companies and LLPs report on their payment policies and practices, to make them more accountable and responsible for the policies they put in place.

 

It also stresses that the information reported must be made easily accessible to small firms, to allow them to gain real value from it.

 

Access to finance is just one of five general aims of the Bill; the others include opening up new opportunities in competition, growth, innovation and export markets.

 

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