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Cause of late payments must be treated

Insight | Late payments | Symptoms | ACCA

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The new government needs to treat the cause of late payments, rather than the symptoms, if it is to solve the issue, according to the Association of Chartered Certified Accountants (ACCA).

It claims that UK policymakers need to "rip up the rulebook" and start again when it comes to how they manage and regulate late payment, with the the key to ending it being to build a financial infrastructure that boosts trade credit.

ACCA spokesman Andrew Leck said that the issue of late payment is "life-threatening" for many organisations in the UK, and its impact on the smallest businesses is most acute.

Those with fewer than 50 employees are typically twice as likely as large corporates to report problems with late payment, but with the right intervention, he says late payment does not have to be a fact of life for businesses.

"At its most basic form, late payment is a form of credit and in an ideal world, where all solvent businesses would have prompt, uninterrupted access to finance from diverse sources, late payment would be very rare," Mr Leck explained.

"With a new government in place, we now have the perfect opportunity to stamp out our culture of late payment by taking a fresh look at the causes."

The Secretary of State for Business, Sajid Javid, has the opportunity to make trade credit regulation more effective and simultaneously end the "scourge of late payment" currently affecting the economy, according to Mr Leck, who says ending late payment has proved to be an elusive goal for governments across the world, not just the UK.

What the new UK administration therefore needs to recognise is that late payment is essentially a demand for credit, and start tackling the problem as such, with the incoming business ministers fully focusing on building a financial infrastructure that boosts trade credit through support of alternative finance and the free availability of credit information.

Mr Leck concluded: "This approach has the potential to be far more effective than the measures currently proposed around improving the legal framework for late payment disputes and ensures that government policy makes a positive difference far earlier.

 


Posted by Jon Aspinell on 11th June 2015

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