The Government has recently announced 'tougher' measures to tackle the issue of late payments to small businesses. The new measures include:

• extending the Reporting on Payment Practices and Performance Regulations 2017 (SI 2017/395) which require certain businesses to publish information about their payment practices;
• broadening the powers of the Small Business Commissioner: enabling the Commissioner to undertake investigations and publish reports on the basis of anonymous information and intelligence;
• asking businesses to reaffirm their commitment to the voluntary Prompt Payment Code every two years (rather than just a one-off); and
• providing greater advice to small businesses on negotiating payment terms that better suit them, and on how going digital can help them get paid quicker and manage their cash flow.

However, the measures fail to address the real problems caused by inequality of bargaining power.

Transparency will only go so far to encourage good practice and becomes irrelevant in markets which encourage late payment or where a handful of players dominate. Reports which try to show when large businesses pay their suppliers are often out of date and are not incentive enough to change bad behaviour. B Corps, social enterprises and co-operatives often commit themselves to positive payment policies, but their impact is still limited when the same principles do not apply to all enterprises.

Whilst small businesses form a crucial part of large companies’ supply chains, they struggle to hold their customers to account without incurring hefty legal fees (from advisors and the courts). If the Government were serious about 'fostering a stronger payment culture and providing businesses with more predictable and reliable cash flow', it would deploy digital payment technologies as a means by which small businesses could automatically enforce payment of undisputed invoices.

For disputed payments, there needs to be a cheaper and faster alternative to pursuing debt through the courts, which can cause the parties to get caught up in academic, legal principles. The European Commission's Online Dispute Resolution tool and private sector platforms offer a way for neutral third parties to adjudicate on thorny issues and achieve resolution, whilst focussing on practical, commercial outcomes.

Where small businesses do have the resource and fortitude to make it through the court process, they still face the practical challenge of enforcing their Court Order. For those that are relatively lucky, that may mean enlisting the help of bailiffs. For the more really unfortunate, attempts to get hold of the cash can still be thwarted by a well-timed administration process or winding up - a familiar story for the thousands of small business owners who were left out of pocket, when national stationery chain Paperchase went into administration in January 2021.

The measures proposed by the Government don't actually tackle the root causes of late payment of invoices. Instead, they continue to put the onus on small businesses: failing to recognise they rarely have the luxury of negotiating, let alone demanding better terms. For those that do manage to agree fair contract terms, the Government needs to provide a more timely, cost effective and practical means of enforcing them.