Action better late than never

Scottish businesses are facing a storm of rising costs and dwindling confidence. The last thing it needs is an increase in the number of invoices paid late or outside the payment terms agreed in the contract.

An FSB survey released at the beginning of the year found that one in 10 Scottish companies said late payments are threatening their viability and one third of Scottish business owners reported that the problem is getting worse. Across the UK, £23.4 billion of invoices were paid later than expected over the last year.

The Office of the Small Business Commissioner (OSBC) has been surveying companies to understand the impact of poor payment practices, which are a major problem for small businesses. When invoices are not paid promptly, or small suppliers are asked to wait 60, 90 or even 120 days after delivery of the work before getting paid, they can face serious challenges meeting operating costs, servicing debt or paying employees and their own suppliers.

There is hope on the horizon, however. The Scottish Government is working on a Late Payment framework, and as Holyrood works with Westminster and the devolved administrations, there is a chance to build better legislation that will protect businesses from the problems caused by late payments. The Prompt Payment Code (PPC) which is owned by the Department for Business, Energy and Industrial Strategy and administered by the OSBC, offers a good example.

Although it is voluntary, signatories promise to pay 95 per cent of invoices within 60 days and 95 per cet of invoices from small businesses with fewer than 50 employees must be paid within 30 days.

Yet we can go further. Companies already publish metrics relating to their ESG performance and consumers expect businesses to have an ethical stance when it comes to protecting people and planet. Embedding details of payment practices in ESG reports would be a valuable measure of a company’s culture and ethics.

We also believe the development of Open Banking technology and frameworks can play a major part in addressing the challenge of late payments. One of the companies doing good work in this space is Ozone API, which provides banks with the application programming interface (API) technology they need to offer Open Banking services. In a financial context, APIS enable sharing of data between accounts. Ozone co-founder Huw Davies said: “Open Banking makes payments fast, easy and seamless. It will play an important role in tackling late payments.”

Both government and industry must focus on solving this challenge because our businesses deserve a prompt solution to the problem of late payments.

Liz Barclay, Small Business Commissioner