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Is this the key component of the SME-late-payment solution?

It seems like the government is finally taking a firmer stance against serial late payers. However, for small businesses, protecting themselves against this practice remains a challenge. There are a number of steps these firms can take. Using invoice finance is one.

The naming and shaming of perpetual offenders has marked a notable shift in the fight against late payment, not least as those outed for their code-breaking practices included a number of high-profile brands.

And, based on recent comments from cabinet minister Oliver Dowden, the government seems in no mood to soften its approach. Talking recently at a construction conference, Dowden reiterated the threat of a public-sector-contract-shutout for big businesses that do not pay small firms 95% of their invoices in 60 days.

At the same time, Small Business Commissioner Paul Uppal has repeated his call to small businesses to make use of his office’s resources to combat late payment. According to his figures, his office has recovered around £3.5 million in overdue payments for small businesses in the last six months.

In another interesting move, a new banking and accounting app has been launched to help lessen the risk that small businesses face from late payment and unpaid invoices. This insurance-based digital service, from Hokodo and Countingup, can be used to cover key invoices.

Looking at these developments and others in 2019, the energy behind tackling late payment appears to be growing and it will be interesting to see if this momentum is maintained, in particular by the government. Small business owners will be understandably sceptical given past failures to meaningfully act against the practice, but the current signs are encouraging.

Nevertheless, late payment remains a potentially fatal thorn in the side of small business: the Federation of Small Businesses estimates that the practice forces as many as 50,000 firms to close every year, at a cost of £2.4 billion to the economy.

One of the steps that small businesses can take to protect themselves is to use invoice finance.

In the wake of prolonged caution from traditional lenders, a position that Brexit has helped to entrench, alternative finance is providing small businesses with access to capital for vital investment. Spearheading the growth of this sector is invoice finance.

This easily accessible, affordable and flexible service allows firms to secure capital and safeguard cashflow, without jeopardising key business relationships. As much as 90% of an approved invoice can be advanced by a finance provider, with the remainder settled by the customer.

The intensification of the fight against late payment is welcome, but, as ever, it remains to be seen just how effective these efforts are. Regardless of developments, small businesses have to protect themselves and one weapon they should in their armoury is invoice finance.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.

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