The Association of Chartered Certified Accountants (ACCA) has welcomed changes to the UK’s late payment regime.
The proposals, set out by the UK Government's Minister for Small Business and Economic Transformation, promise the most dramatic change to the UK’s payment culture in a generation.
Evidence from ACCA’s global economic confidence survey (GECS) suggests that small business worries over running out of cash dampens hiring intentions and capital investment. The organisation says the new late payment regime could clear the way for significant investment among the UK’s small business sector and kickstart growth.
Proposing to make charging interest on late payments compulsory is an important step in ensuring tardy payers bear some cost for their failure to settle on time, said ACCA. While it has been possible to legally charge interest since 1998, smaller businesses have consistently held off doing so fearing the damage it would cause to the long-term commercial relationship.
Glenn Collins, head of technical and strategic engagement, ACCA UK, said:
“It is good to see a government taking such decisive action on the scourge of companies not paying promptly. Importantly the proposed regulation focuses on large businesses not paying smaller businesses rather than a blanket approach to all. With the overwhelming evidence that late payments is a significant drag on the UK economy these proposals promise to significantly end the problem of poor payment practices. We would suggest that all UK businesses should welcome this step.
“Inevitably there will be issues that companies will have to overcome when the changes are implemented. We look forward to working with the Small Business Commissioner, our members and the wider business community to ensure the required technical, accounting and auditing adjustments are not onerous to implement.”
ACCA said it was also pleased to see that the proposals – which will require legislation – recognise that there will be circumstances that cause companies to settle bills beyond normal credit terms. Comply or explain is a principle which is well understood and could be used to good effect to allow businesses to explain payment terms or settlement times.
Companies rightly complain about cost and administrative burden of implementing legislation, but ACCA believes that after the initial cost of complying with this new regulation – including making system adjustments – the ongoing cost to business who pay on time should be minimal.
