Supporting regulations that empower small businesses and challenge bad payers
Last editedJan 20222 min read
It’s often said small businesses are the backbone of the economy. And it’s easy to see why. According to the Federation of Small Businesses (FSB), small businesses make up more than 99% of the business population. And they account for around 60% of employment and around 50% of turnover in the private sector.
But there’s a pervasive issue that disproportionately affects small businesses – the issue of late payment. And it appears to be worsening, with 30% of small business owners reporting they’ve seen an increase in late payment of invoices in Q4 2021.
Every small business in the UK knows how important it is to be paid on time. Because without adequate cash flow, tough periods – whether due to a seasonal slump, or a global pandemic – put the existence of small businesses at risk. In fact, 440,000 small businesses could be forced to close in 2022 due to late payment alone, based on the FSB’s projections.
“We know that slow and late payments present a serious challenge for small businesses, one that damages their cash flow and weakens their bottom line. On the flip side, we also know how powerful prompt payments can be, helping SMEs unlock significant growth which can, in turn, power the wider economy.”
Pranav Sood, VP Small Business, GoCardless
That’s why we support the Good Business Pays movement
Here at GoCardless we’ve been focused on helping businesses take the pain out of getting paid, for over 10 years. Combating the late payment problem, and supporting small businesses, have been part of our DNA from the beginning. That’s why last year we threw our support behind Good Business Pays, a movement set up to campaign on behalf of the UK’s small business community, to bring an end to slow and late payments by bigger businesses.
Good Business Pays recognised the difficulty small businesses have in challenging their big customers about overdue invoices or unfair payment terms. And so the movement acts as a voice for that community – speaking to big business leaders without fear or favour.
They also provide data on the payment practices of the UK’s big businesses, helping smaller suppliers understand what kind of payment timings they can expect before getting into business with them. This data is available thanks to the government’s ‘Duty to Report’ regulations – a statutory duty for large companies to publish and report their payment terms every six months.
But the government is now questioning these regulations
An open consultation has been issued, seeking to assess whether the regulations have helped achieve the desired result, and if less regulation could be imposed.
Good Business Pays and GoCardless both believe these regulations should stay. To provide small businesses the transparency they deserve around payment practices. And to put pressure on big businesses with poor payment practices to do better for their smaller suppliers.
Terry Corby, Chairman of Good Business Pays, said: “We need to keep up the pressure on big businesses to pay invoices fast and on time to small and micro businesses. With this government review, there’s a real risk the Duty to Report regulations get dropped. If that happens there will be no transparency around how long large companies take to pay their suppliers, which could kill hundreds of thousands of small businesses. We need to collect the feedback of the small business community and make sure the government hears them, so these regulations can remain.”
We want your voice to be heard
The government is closing their consultation in early February 2022. To collect and deliver feedback to the government on behalf of the small business community, Good Business Pays is running a short, anonymous survey until January 25th.
The results will also be shared with GoCardless, so we can amplify the voice of the small business community in our own content.
If you have 5 minutes, and want to help support regulations that help small businesses and hold bad payers to account, click below to start the survey.