Late payments are having a significant human impact on small businesses across the UK, with the Office of the Small Business Commissioner (OSBC) stepping in to recover millions of pounds owed. Mia Rees, Head of Policy and External Affairs at the OSBC, highlighted the pervasive problem and the role of technology in finding solutions.
The OSBC's casework service assists small businesses (under 50 employees) owed money by larger ones. Since its inception, the service has recovered over £10 million, with £1.5 million recovered in the last financial year alone. The organisation also promotes the Fair Payment Code, a standard for prompt payers, which has seen over 650 businesses sign up, with rapid growth expected.
Rees explained that the silence surrounding late payments, often perceived as a sign of poor financial management, exacerbates the problem. However, the issue is common and can have devastating effects, with an estimated 38 businesses closing daily in the UK due to late payments. This also results in businesses losing approximately 86 hours per year chasing debts, totalling over 133 million hours economy-wide.
New legislation is progressing through Parliament to address these issues. It aims to cap standard payment terms at 60 days, make late payment interest mandatory at 8% above the Bank of England base rate, and grant the Commissioner powers to investigate persistent offenders and issue fines. In the construction sector, the bill would ban retention payments.
Technology, particularly e-invoicing, is seen as a crucial tool. Digital platforms can automate payment chasing and tracking, saving businesses valuable time and removing the awkwardness of manual follow-ups. This technological advancement, combined with stronger legislation, is expected to shift payment culture towards fairness.
