Calls from MPs to toughen up the UK’s late payment regime have been welcomed by a regional business insolvency expert.
Andrew Haslam, North East chairman of insolvency and restructuring trade body R3, was speaking after the business, energy and industrial strategy select committee issued a report criticising ‘disgracefully’ bad payment practices, especially within larger companies, and called for all medium and large companies to be forced to sign the Prompt Payment Code.
He said: “There has been a great deal of effort in recent years to improve business practice around paying suppliers on time, and some progress has been made, but R3 North East members are still working every single day on business insolvencies where late payment has been a key contributory factor.
“Advances in technology mean that there is no legitimate reason why straightforward invoices can’t be paid within the allotted time period, if not immediately on receipt, but the stubbornly high proportion of business insolvency cases where late payment is a central issue clearly shows that this is simply not happening often enough.
“When a company is not paid in advance for goods or services, it essentially acts as a lender for its clients, but it does not have the protection that a secured lender receives, and can set itself up for cashflow problems if payments don’t materialise as expected.
“This puts unnecessary strain on the finances of businesses, and can stop them investing in new services, taking on new commercial opportunities, or even having enough cash in the bank to cover their day-to-day costs, which can threaten their very viability.”
The Prompt Payment Code commits signatories to paying suppliers within the agreed terms of their contracts.