Contractors asked to join campaign to call ‘late payment’ what it really is

Contractors can sign their names to a number of new efforts underway to combat late payment, including no longer calling it ‘late payment.’

A government consultation proposing that rules forcing big businesses to disclose their payment practices should be extended, beyond their April 2024 expiry, is one such effort.

'Unapproved debt'

But a separate push against late payment, by Xero, proposes that aside to the consultation (which is open until April 28th 2023), late payment should be renamed “unapproved debt.”

A specialist at chasing unpaid contractor invoices, Safe Collections, is unconvinced that the software firm’s renaming idea will change much -- so it’s tabling its own remedy.

“What we would really like to see is a further strengthening of the late payment directive originally introduced way back in 1998,” the specialist told ContractorUK.

Updating the fixed costs applicable on an unpaid invoice, or even clarifying the “reasonable costs” creditors can impose on late payers, would be a start for Safe Collections’ Adam Home.

'Miserly'

A senior collections manager, Home believes the current amount of applicable fixed costs are “miserly,” and he fears changing the term ‘late payment’ will also short-change those seeking redress.

“As a firm that has specialised in recovering late payments since 1984, we aren't convinced that a change in terminology to ‘unapproved debt’ is going to be the panacea that cures all late payment ills,” the Safe Collections manager said after being told of Xero’s campaign.

“[Instead] the original legislation and subsequent amendments have had a definite and meaningful impact on late payment culture in the UK. And for this reason, we would like to see this continued by way of strengthening these existing protections.”

'Push for change'

Home hinted the email address in the BEIS consultation on extending the payment practice disclosure rules could be used by those who want to endorse strengthening the 1998 legislation.

But to change the culture around late payment it is first necessary to change its language, according to Xero senior account manager Paul McKay.

“We are asking you, the businesses directly affected by poor payment times to sign our open letter and help push for change…by calling [late payment] what it is: unapproved debt.”

'Timely fashion'

Posting to LinkedIn about the campaign, McKay said when thinking of late payments as ‘unapproved debt,’ 81% of large companies would be more likely to pay their suppliers in a “timely fashion.”

“Big firms are treating small suppliers like bankers, but without disclosing it to their investors,” he said, acknowledging such small suppliers still report being kept “up at night” due to being unpaid.

McKay added: “If they [big firms] are going to do that, they should be prepared to be accountable for it.”

'Hold non-compliant businesses to account'

Enterprise minister Kevin Hollinrake MP believes a combination of moves by the government has increased the accountability of those who feel that they can pay late and get away with it.

“Evidence from the recent statutory review of the reporting on payment practices and performance regulations suggests there has been some improvement in payment practices since the introduction of a number of measures by government,” Mr Hollinrake writes in the consultation.

“These include the regulations themselves, along with the Prompt Payment Code, and the establishment of the Small Business Commissioner to hold non-compliant businesses to account.”

'Ghosts you without paying'

Ahead of hosting an April 26th SME clinic in Hereford on avoiding errant payers, digital accountant Sharon Pocock confirmed that outstanding invoices are still a “huge issue” for tiny companies.

But Pocock says suppliers can take “many” steps to protect themselves from being out-of-pocket, ranging from “before you even make a sale, right through to what to do if your customer ghosts you without paying.”