The rules, announced by the government today, will also see audit committees required to report companies’ payment practices in their annual report and company boards held accountable for payment practices to small businesses within their companies.
“The vast majority of businesses pay their bills on time,” said small business minister Kelly Tolhurst, with the amount owed in late payments halved over the last five years.
“But as a former small business owner, I know the huge impact a late payment can have on the ability of a small business to plan, invest and grow.”
She added that the new measures would ensure that small businesses are paid quickly, “ending the unacceptable culture of late payment”.
Under the new regime, small business commissioner Paul Uppal will take on responsibility for administering the Prompt Payment Code, and will receive additional powers to hold larger companies to account when they fail to make payments on time.
Potential new powers could include compelling companies to provide information and disclose their payment terms and practices. Uppal may also be empowered to impose financial penalties and binding payment plans where he finds companies’ payment practices are unfair.
The government intends to consult on the extension of the small business commissioner’s powers.
Welcoming the government’s move, Federation of Small Businesses (FSB) national chairman Mike Cherry said that the SMEs he represents would be delighted.
“FSB has worked very hard with government to create a whole-board approach to late payment with the UK’s large companies, and empower audit committees to look after the supply chain,” he explained.
These changes, plus strengthened powers for the small business commissioner and reform of the Prompt Payment Code, he added, could finally see an end to poor payment practice.