Prime minister David Cameron will today announce plans for a government consultation on late payments in an effort to tackle this ongoing problem for small businesses.
Cameron said he wanted to see prompt payment of suppliers become a core corporate responsibility.
He said: “It’s not right that suppliers are not getting paid on time for the work they do and the services they provide and I know that late payment can have devastating effects on our small and medium sized businesses.”
The consultation will seek to address whether more can be done to strengthen the existing Prompt Payment Code, and whether more legislation will be necessary.
Cameron added: “I am determined to make Britain the best place to start, grow and do business and to back people who want to work hard and get on.
John Allan, national chairman of the Federation of Small Businesses, said that being paid late can severely hamper small firms.
“They simply don’t have the same cash-flow buffer as a large businesses, so being paid on time can be the difference between being able to pay staff and not,” he said.
“Furthermore, when a small firm is paid late they then can become late payers themselves.
Katja Hall, the CBI’s chief policy director, said: Late payment is a serious issue for all businesses but particularly for smaller firms, as cash flow is their life blood.
Businesses already have a number of routes for recourse if they are paid late, but the reality is that few choose to act on late payment for fear of fall out with their customers.
Cameron also highlighted a £2,000 national insurance cut, which will be introduced to the House of Commons today. Over 90 per cent of the benefit of Employment Support Allowance will go to small businesses.
Cameron added: ?We are determined to do everything we can to ensure that our small firms can be successful and prosperous and people can fulfil their aspirations.
“The Employment Allowance, which will benefit up to 1.25m businesses and result in around 450,000 businesses seeing their employers” National Insurance contribution payments stop completely, is another example of the action that this government is taking to back small businesses and help people get on.
John Allan said the tax cut would be warmly welcomed.
“It will have a positive impact on small firms and the economy when it comes into force next spring,” he said. Our members have said they?ll spend the savings on their business, either through investing in the business, increasing wages or taking on staff.
Related: How to get paid on time