Credit management experts say proposals in the Small Business Bill requiring large companies to publish detailed information about payment practices will enable small businesses to enter into commercial relationships with their eyes wide open.
Philip King, chief executive of the Institute of Credit Management, said that the new reporting regime would help small businesses identify the best paying large companies, and better manage their cash flow accordingly.
He was speaking as the government announced a consultation on the Small Business Bill proposals. It was launched on 27 November and will continue until 13 January.
Mr King said: “Transparency is a key element in changing culture across many aspects of business, and payment behaviour is no exception.
“The proposed new measures will allow more visibility of how businesses behave in paying their suppliers. Small businesses need to make better informed decisions before entering into commercial relationships and this measure will be invaluable in helping them enter into such relationships with a clear picture of what they are letting themselves in for.”
The proposed changes will oblige larger companies to report: the average payment time; the proportion of invoices paid beyond terms; and the proportion of invoices paid within 30 days, over 30 days, over 60 days and over 120 days. Reporting on a quarterly basis will be a mandatory requirement for all large and quoted companies.
Business Minister Matthew Hancock said: “We know that small businesses are often reluctant to risk losing business by using the redress measures we’ve put in place, so we want to tackle the underlying culture by increasing transparency on payment practices and performance.”
“The measures we are consulting on will make it clear to small businesses and consumers alike which large businesses behave properly, and those that think they can ride roughshod over their suppliers.”
Palmers partner Andrew Skinner, who leads the firm’s debt and insolvency team, said: “There are a range of options available to assist creditors in recovering money owed and our experienced team can provide expert advice to assist creditors in deciding on the action most likely to result in recovery. For more information, please contact us.”