Traffic light warning system for late payment of business bills
A traffic light warning system for business bills is to be proposed by Small Business Commissioner after new research into the scale of late payments showed that invoices are taking an average of 37 days to be paid to smaller firms north of the border.
The study by Lloyds Bank Commercial Banking, in partnership with the commissioner, found that in Scotland nearly one-third of payments owed to small firms by larger business customers are paid after the commissioner’s recommended 30 days, and across the UK 21 per cent take more than 50 days.
Big companies have been required to report their payment practices twice a year since 2017, although many are yet to disclose details. The data will be used to highlight repeated late payers and give them a red light, allowing suppliers to avoid them if they choose. Those that fail to report their payment terms will also receive a red.
Late payment is often identified as the biggest issue facing small businesses and has been cited as a cause of anxiety and depression among company owners. The Federation of Small Businesses estimates that large companies neglecting to settle their bills causes about 50,000 businesses to fail every year.
The traffic light system proposed would help small firms to identify which large businesses habitually pay their bills late.Legislation introduced in April 2017 required all large businesses in the UK to publish their payment practices.