Official figures suggest that small businesses are owed £30 billion in late payments, putting companies at risk of insolvency and job losses.
However, small companies are unlikely to publicly criticise larger companies because they will not want to lose their business.
Many large companies have blamed inaccurate invoices from smaller businesses for the delays in payment so MPs also want start-ups and SMEs to be given free financial management advice.
MPs now want to introduce measures to force larger companies to reveal how long they take to pay their bills to smaller businesses. A cross-party Parliamentary inquiry has produced a report which recommends companies are made to publish performance data on the length of time they take to pay suppliers.
The inquiry has also called for ministers to work in partnership with businesses to create a Fair Treatment Charter. There may also be measures taken to strengthen voluntary codes like the Prompt Payment Code, introduced by the Institute of Credit Management.
The inquiry found that late payments were an issue for all industry sectors but particularly in manufacturing and construction.
Fair payment could also become a contractual requirement for new Government contracts. The report recommended the Government pay directly contracted firms paid within 14 days, sub-contracted firms within 19 days and those firms sub-contracted twice within 23 days.
MP Debbie Abrahams, who chaired the inquiry, says: “The public has grown tired of hearing about huge, greed-driven pay packets, pay-offs for failure and tax evasion. But allowing a culture of late payment to go unchallenged is another executive-level decision that affects ordinary, hardworking, people across the country.”
According to the Forum of Private Business, half of all SMEs – that’s 861,000 companies in total – experienced late payments during 2011. And companies not paying each other fairly and on time was costing businesses in the UK a total of £20 billion each year.
Here are our tips for protecting yourself against late payments: