A New Government Act Could Make A Huge Difference To Small Businesses.
If you run a small business and have “big-businesses” as your customer base, you know only too well the stress caused by late payments of invoices.
Many small businesses worry that if they cause a fuss, they may jeopardise a potentially lucrative contract however when invoices are unpaid for 60 days, 90 days and sometimes longer, it can have a detrimental impact.
Fortunately, a new Government Act is on the horizon that could help the situation.
Payment Practices of Large Companies Tackled by the Small Business, Enterprise and Employment Act 2015.
One of the key provisions of the Small Business, Enterprise and Employment Act, which is due to be implemented in April 2017, may offer considerable relief for small businesses struggling to manage their cash flow.
Section 3 of the Act will apply to large companies, quoted companies and large limited liability partnerships and will require them to publish key information every six months. The aim is to reduce the payment pressures for small businesses, while also smoothing their cash flow.
Large businesses will be required to report key information about their standard payment terms, the average time they take to pay invoices, the percentage of invoices that they pay after the agreed term has passed and figures on the proportion of invoices that are paid within 30 days, between 31 and 60 days, as well as those that take more than 60 days.
With late payments being a potentially pivotal issue for small businesses, particularly when dealing with larger organisations where they do not have the same bargaining power, this information could provide valuable insight when establishing new trading relationships.
Ensuring that you have robust terms and conditions in place to protect your business cash flow is crucial! This extra information will offer excellent opportunities to negotiate fair terms for all small businesses.
To discuss these matters in more detail contact our Company and Commercial Law team on 01792 450010 or email [email protected]