Accountancy body the Association for Chartered Certified Accountants (ACCA) has called for improved reporting on poor payment practices and an extension of the power of the Small Business Commissioner, as part of action to tackle the crippling effect of late payment on small businesses.
In its response to government consultations reviewing late payment measures ACCA pointed out that late payment remains a persistent problem across the UK economy. Poor payment practices have a domino effect on cashflow across supply chains, with devastating consequences for small businesses.
The accountancy body, whose members work in finance across the economy, including as advisors to SMEs, acknowledged the need to avoid any unnecessary regulatory burden for business but stressed the need to expect high standards from large firms’ corporate reporting.
ACCA highlighted that reporting requirements needed to be retained and strengthened, with criteria amended to tackle under-reporting of payment practices in relation to overall value of late payments, the nature of disputed invoices, as well as the use of intermediaries in settling payment, for example through use of supply chain finance. ACCA also suggested that larger firms should include their payment performance to suppliers in directors’ reports, as well as signalling whether they have signed up to the Prompt Payment Code.
Commenting on the ACCA’s response Lloyd Powell, ACCA Cymru/Wales head, said: “Legislation is an important component of tackling poor payment and it is important to retain, and strengthen – not weaken – the regulatory approach, alongside other measures such as education and awareness raising around the impact of late payments.
“We know that businesses are increasingly focusing on their supply chain reporting, whether through best practice in corporate governance, or through increasing sustainability commitments. It makes sense to dovetail better reporting on payment practices into this work, so strengthening the current reporting requirements is a proportionate response to the ongoing problem facing so many small businesses.”
Responding to discussion about the number of complaints filed by small firms with the office of the Small Business Commissioner, ACCA highlighted fear by SMEs about the consequences of complaining about a larger, more powerful customer. The professional body called for the powers of the Commissioner to be extended to enable the office to instigate investigations where an appropriate level of information suggests poor payment practice by a business.
Lloyd Powell said: “As amongst the most trusted advisers to small businesses in Wales, accountants have a key role to play in supporting firms to minimise their risk of falling victim to late payment. We’ve worked closely with the Small Business Commissioner to shine a spotlight on late payment and develop the tools to tackle it. We know there’s more to do so we support a stronger role for the SBC to instigate investigations. Similarly, it’s key to enable small firms to make informed decisions about who they do business with, so government needs to commit to do more to extend the availability of payment performance information.”