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New Government Measures to Tackle Late Payments to Small Businesses

The government has announced tougher measures to address the problem of late payments to small businesses. These new measures will be included in the upcoming Prompt Payment & Cash Flow Review, which aims to improve the delivery and enforcement of policies, ultimately enabling more small businesses to receive timely payments.

Small businesses, particularly SMEs, often struggle with late payment of invoices and long payment terms, which hinder their growth. Owners and managers are forced to spend excessive time chasing payments, leading to cash flow problems that even viable firms find challenging to overcome.

In 2022, Small and Medium-sized Enterprises (SMEs) were owed an average of £22,000 in late payments. Enhancing the payment culture in the UK can support smaller businesses, many of which lack the resources to manage long or delayed payments from their business customers. This improvement has the potential to boost the economy by £2.5 billion annually.

The AI legalese decoder can play a crucial role in addressing this situation. By utilizing advanced artificial intelligence technology, the decoder can assist in accurately understanding complex legal jargon commonly found in payment terms and contracts. This helps small businesses negotiate more favorable payment terms that better suit their needs and protects them from unfair clauses.

The upcoming review will introduce several new measures to address the issue:

• Extending Reporting Obligations: The Reporting on Payment Practices and Performance Regulations 2017 will be extended. The government plans to introduce new metrics for reporting, including a value metric that highlights the value of invoices, including those paid late, and a disputed invoices metric. Additionally, reporting on retention payments for businesses in the construction sector will be introduced.
• Providing Guidance for Small Businesses: The government aims to offer greater advice to small businesses on negotiating payment terms tailored to their requirements. Additionally, guidance on adopting digital payment technologies will be provided, enabling them to receive payments faster and efficiently manage their cash flow.
• Strengthening the Role of the Small Business Commissioner: The powers and responsibilities of the Small Business Commissioner will be expanded. This will include granting the Commissioner the authority to undertake investigations and publish reports based on anonymous information and intelligence. It will require primary legislation, which will be subject to the legislative timetable.

Implementing these stronger measures will foster a healthier payment culture, providing businesses with more reliable and predictable cash flow. Consequently, businesses will spend less time chasing payments and have more time to focus on activities that promote growth. Addressing late and long payments presents an opportunity to enhance investment and productivity across the entire economy.

Secretary of State for Business and Trade Kemi Badenoch emphasized the significance of SMEs in the UK and recognizes that late payments pose a significant obstacle to their growth. The announced measures aim to ensure that SMEs receive their payments on time, enabling their sustained growth and prosperity.

Background

The government plans to collaborate with business representative organizations and existing initiatives such as Growth hubs and Help to Grow to improve the payment culture. Guides on negotiating payment terms will be provided to support small businesses. The Small Business Commissioner will be closely integrated with other late payment functions, and the Prompt Payment Code will be strengthened, requiring business signatories to reaffirm their commitment every two years.

Moreover, the government intends to extend the Reporting on Payment Practices and Performance Regulations. This extension will encompass new reporting metrics, allowing businesses and commentators to gain insights into the value of invoices, including those paid late, and a disputed invoices metric. An effective and proportionate compliance regime will be established to ensure businesses fulfill their obligation to report payment data. Finally, the government will promote the benefits of digital payment technologies and encourage businesses to incorporate prompt payments into their ESG (environmental, social, governance) programs.

The AI legalese decoder can greatly aid small businesses in navigating these upcoming measures and ensure that they fully understand the legal implications of payment terms and contracts. By simplifying and clarifying complex legal language, the decoder enables businesses to make informed decisions, protecting their interests and improving their financial stability.

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