Cameron McCoig, solicitor at law firm Mayo Wynne Baxter, has responded to the government’s crackdown on late payments.
The incoming reforms are a welcome shift towards rebalancing payment practices in favour of SMEs. The introduction of meaningful financial penalties, mandatory interest rates and the expansion of investigatory powers for the Small Business Commissioner are encouraging and should improve accountability among larger organisations by discouraging the practice of using smaller suppliers as a source of credit.
SMEs should now review their existing payment terms, credit control processes and contracts to ensure that their procedures are aligned with the new regime and are as robust as possible. Larger businesses, meanwhile, should carefully review their payment practices and approval workflows to identify bottlenecks and prevent avoidable delays that may result in regulatory penalties.
Although encouraging, the real test of these reforms will depend on the consistency and speed of enforcement. It remains to be seen how effectively non-compliance will be addressed in practice.
While the reforms mark significant progress, there is a question as to whether the 60-day payment cap goes far enough. A universal 30-day standard may ultimately be needed to afford more encompassing protections for small businesses.
However, if delivered effectively, these measures could help relieve pressure on an overstretched civil justice system by reducing avoidable debt claims and insolvency-driven disputes.