Calls for new Government rules

Ministers accused over worsening late payments

Derek Mackay

Derek Mackay: admitted late invoice payments (photo by Terry Murden)

SNP ministers have been criticised over the government’s worsening record of not paying its bills on time.

One in four  undisputed invoices are paid late, according to new figures gathered by the Scottish Labour party.

The figures are revealed just a week after the UK government appointed Paul Uppal as small business commissioner to help 5.7 million small businesses across the UK resolve disputes around payment practices.

According to Westminster, a third of payments to small businesses across the UK are late and 20% of all small businesses have run in to cash flow problems as a result of late payments.

Scottish Labour now accuses the Holyrood government of failing small firms. It says Finance Secretary Derek Mackay has admitted that almost a quarter of undisputed invoices were not paid on time by the Scottish Government and the bodies which share its finance system between April and October this year.

The number of undisputed invoices paid within five days has fallen from 81% in 2011/12, according to Labour.

An FSB report earlier this year revealed that 2,000 businesses a year are going to the wall because too many clients don’t pay on time or, in some cases, at all.

More than one in five (21%) are owed more than £25,000 and almost one in ten (9%) are owed more than £100,000.

The SNP government’s Business Pledge scheme, designed to encourage the private sector towards ethical business practices, includes a ‘prompt payment’ criteria. 

Labour’s manifesto for the 2017 General Election pledged to declare war on late payments by using government procurement contracts to ensure that anyone bidding for a government contract pays its own suppliers within 30 days.

It also pledged to develop a version of the Australian system of binding arbitration and fines for persistent late-payers for the private and public sectors. 

Jackie Baillie

Labour’s Economy spokesman Jackie Baillie (right), said: “Late payments can stop our small businesses from growing, and it is simply ridiculous that the Scottish Government is so bad at it, with nearly one in four bills not being paid on time.   

“This has a real knock on effect for small and medium sized enterprises on government contracts which need the cash flow to keep trading. 

“The SNP government should set a new target to have 100% of undisputed bills paid within five working days. This would set good practice for business and make sure organisations on government contracts are getting their payments on time. 

“Ministers should also ensure no public contract or taxpayer grant goes to a company that fails to pay the bills on time. This is taxpayer money – we should lay down the rules.”

A Scottish government spokesman said Labour’s claims were inaccurate.

He said the aim was to pay suppliers’ invoices within 10 days enabling it to carry out checks and pay promptly.

Labour’s claims follow research published last week by business finance company MarketInvoice revealing that 62% of invoices issued by UK SMEs in 2017, worth over £21 billion, were paid late. 

The average value of these invoices was £51,826 and three in ten invoices paid late took longer than two weeks from the agreed date to settle, with some taking almost six months to be paid.

Sectors that frequently pay late included the food & beverage industry (83%), energy businesses (80%) and wholesalers (79%). Those who took the longest to pay included transport businesses (25 days), utilities (23 days) and those in media sector (21 days).

Businesses in Northern Ireland were found to be the worst late payers with 93% of invoices paid late. East Anglia (68%) and East Midlands (66%) came in second and third respectively. Scotland was the best of the worst, where half (53%) of invoices were settled late. 

The research examined invoices sent to 93 countries. German companies were the worst late payers, taking an extra 28 days to settle invoices from agreed terms. French firms took a further 26 days and businesses in the US 20 days.

Bilal Mahmood, MarketInvoice spokesman, commented: “A bad situation is getting worse. The problem is being compounded by 90-day payment terms demanded by larger organisations, which are becoming more common. SMEs need to understand what measures they can take to reduce the risk, such as making T&C’s clear from the outset, chasing payments down and enforcing the right to claim compensation from late payments.”

“We look forward to how the Duty To Report  measures [which requires large businesses to report on invoice payments twice yearly] that came in to force earlier this year will play out. This is not about naming and shaming but encouraging positive behaviours at big business.”

Campaigners, such as the Scots businessman Ken Lewandowski, have called for new legislation to tighten up on late payment.

Mr Lewandowski has questioned the effectiveness of a small firms commissioner for the UK.

He chaired a group that looked into the problem in the public sector which led to the creation of Project Bank Accounts.

It aims to stop a main contractor who is paid by the government holding back paying sub-contractors. The money instead goes into the PBA and everyone is paid at the same time.

In an interview with Daily Business last year he accused main contractors of bullying sub-contractors, telling them that if they go to court they’ll get no further work from them.

He says some big companies use small firms as an overdraft facility, hanging on to thousands of pounds, sometimes for several months.


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