Labour MP for North Tyneside, Mary Glindon is among a growing number of politicians to express concern at the late payment of invoices to SMEs.
At a debate held at Westminster Hall on 22nd July, Mary Glindon MP cited Oxygen Finance as an example of a successful early payment programme being implemented by councils today. Furthermore, the speech raised the question that “early rather than prompt payment is what matters”.
Mary Glindon commented specifically about the advantages of the Oxygen Finance early payment programme to councils: “It seems to be a success for councils and is a lifeline for small businesses in the supply chain. With the call to Government from businesses and politicians to strengthen the prompt payment code, such a system could be one answer.”
The Parliamentary Under-Secretary of State for Communities and Local Government, Kris Hopkins MP, responded: “Councils have an important role, because they are substantial buyers of goods and services. Last year, local government spent £57 billion pounds on procuring goods and services from a wide range of businesses and voluntary organisations, both large and small. Prompt payment is critical to the cash flow of many suppliers and failure to pay on time can lead to serious problems, especially for small businesses, ultimately putting at stake their ability to continue trading.”
Kris Hopkins then summarised the impact of relevant legislation and directives on councils as follows:
Late Payment Legislation – Interest on Late Payment
“…Late payment legislation allows companies to charge interest on late payments at 8% above base rate; to apply charges to cover administrative costs; to assume a 30-day term for the purpose of calculating late payment charges if a contract term is not explicitly agreed; to be subject to mandatory 30-day payment terms, maximum, for transactions with public authorities, which reflect the current policy in the UK; and to be subject to maximum 60-day payment terms between businesses, unless they expressly agree otherwise and it is not grossly unfair.”
EU directive on Public Sector Procurement
“…a legal requirement for all new public sector contracts to include 30-day payment terms for all the contracts in the supply chain, so that smaller businesses are paid on time; and a requirement from next year for all public bodies to publish details of instances of late payment and interest paid as a result of those late payments.”
New Procurement Reforms
“There is also a range of new procurement reforms in the Small Business, Enterprise and Employment Bill, which has had its Second Reading in the House, including a new enabling power allowing Government to place new duties on bodies relating to procurement. In future, and subject to consultation, the power may be used to require procurers to run timely and effective procurements and to manage contracts effectively.”
Mystery Shopper Scheme
“The Government have also set up the mystery shopper scheme. Suppliers can refer instances of late payment on public procurement contracts or in public procurement supply chains to the scheme. That will then be investigated and reported on by the scheme.”
The Prompt Payment Code
“Tackling late payments is also about creating a responsible payment culture. The prompt payment code, which was developed by the Institute of Credit Management, encourages and promotes best practice between organisations and their suppliers. Signatories to the code commit to paying their suppliers within clearly defined terms and ensuring that there is a proper process for dealing with any issues that may arise.”
Local Government Association’s National Procurement Strategy
“The Government recognise that being paid on time is vital to suppliers. There is already a legal requirement for public bodies to pay suppliers within 30 days or be liable to interest resulting from paying late, and we are legislating to ensure that small firms get treated fairly by mandating prompt payment terms all the way down a public procurement supply chain. However, the sector also has a role to play, and I am pleased to see that the Local Government Association recently published a national procurement strategy that sets out the need for prompt payments. It makes it clear that councils can no longer accept their small and medium-sized enterprises having to wait longer for invoices to be paid.”
There is no doubt that both legislative and media spotlights are converging on how councils tackle the issues of late payment to SMEs. Implementing early payment in practice without specialist resource, supplier on-boarding expertise and technology will create significant resource and process issues for many councils. These limitations need no longer be viewed as a constraint to the implementation of such a programme. Oxygen Finance is increasingly recognised as delivering a proven and pragmatic fully-resourced programme that achieves early payment for suppliers and improves transactional efficiency, while generating additional revenue for councils.
To read the full Hansard Report, click here.