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The Small Business Commissioner, Paul Uppal, has recommended a new “traffic light” system that will warn smaller firms which businesses have a consistent record of late payment and those most likely to request longer payment terms.
It is thought that around £2.5 billion is lost annually within the economy due to late payments and they have been attributed to the closure of around 50,000 businesses each year.
Under the new proposals, current payment data collected by the Government will be used to highlight businesses with a poor record.
Large companies have been required to report supplier payment records twice a year since 2017 and so it is thought that the Government already holds a good record of poor payers. However, companies which fail to report payment practices will also receive a red light under the new system.
The Small Business Commissioner explained that his plans would allow smaller suppliers to make better decisions on who they work with.
The Government has outlined its own measures that will ensure that public contracts are only given to companies that can demonstrate prompt payment to their own suppliers.
At present, the Commissioner does not have the authority to distribute late payment fines, and his department only managed to recover £2.1 million in unpaid invoices his first year in office.