Two weeks ago (19 June 2019), small business minister Kelly Tolhurst unveiled a new package of measures she says will "end the unacceptable culture of late payment".
The proposals she announced include introducing new powers for the small business commissioner, and holding company boards to account for their practices.
Bringing an end to late payments altogether would be a welcome development for many in the business community, with 97% of businesses having been paid late at some point in time.
The problem tends to disproportionately affect smaller firms, leading to the closure of around 50,000 small businesses a year according to the Federation of Small Businesses (FSB).
The FSB called the new proposals a "victory for small businesses", having clamped down on larger businesses with poor payment practices. The group's national chairman, Mike Cherry, added:
"Everyone deserves to be paid on time when they have done the work and provided the goods and services requested.
"Ending late payments and poor practices is not only the right and fair thing to do, it will also spare small firms the financial impact of waiting for the money they're owed, and instead allow them to invest and grow."
Edwin Morgan, interim director-general of the Institute of Directors, said the measures marked a "significant step forward in the fight against late payments".
The Government has said it will consult on introducing new powers for the small business commissioner.
These include the power to enforce information requests and disclosure of payment terms and practices, and to impose binding payment plans or financial penalties on large businesses that pay late.
The commissioner will also be given responsibility over the voluntary prompt payment code.
Additionally, new legislation has been proposed to allow for the prosecution of large businesses that do not comply with an existing requirement to report their payment practices twice a year.
The Government also said it will create a new fund to encourage small businesses to use technology to simplify their invoicing, payment and credit management.
What you can do
While these measures are a positive step towards bringing late-paying businesses to account, there are a few things small businesses can do themselves to combat late payments.
You can claim interest and debt recovery costs if a business transaction is made 60 or more days later than the payment date.
The payment date will be the one you agreed with your customer. If you didn't agree on one, it will be set at 30 days after the customer gets the invoice, or you deliver the goods - whichever is later.
You can charge statutory interest on late payments. This is a rate of 8% plus the Bank of England base rate.
You can also claim debt recovery costs of £40 for debts up to £999.99, £70 for debts between £1,000 to £9,999.99, or £100 if you're owed £10,000 or more.
Make sure you agree payment terms with your customer before starting the work, and include them in your invoice when you send it.
Your invoice should also be as clear as possible, include all the relevant information, and be sent promptly after you've finished the work.
Don't be afraid to follow up with reminders to encourage your customer to make their payment.
This doesn't have to mean a huge amount of additional work. In fact, technology can do most of this for you, with accounting software available for setting up invoice templates and sending them automatically.
We can help with managing business cashflow.