Know your rights!

The rules around payment are changing.

Payment times are reducing. Not paying on time will have immediate consequences, and those who make a habit of it will be investigated and fined.

I am talking about the Commercial Payment Bill currently working its way through Parliament.

The Bill might still be on its journey, the peals of Big Ben ringing overhead, but small businesses need to understand what this Bill will mean now, so they can start preparing and getting ready for the changes.

There are four key changes that all businesses need to know about:

1. 60-day payment terms: The Bill proposes introducing a maximum payment term of 60 days for large businesses paying smaller suppliers, with limited exemptions
2. Interest on late payments: Interest on late payments of 8% plus the Bank of England base rate would become mandatory, making late payment no longer cost-free.
3. Time limit on disputes: A defined timeframe for raising invoice disputes has been proposed, aiming to prevent delays caused by late challenges.
4. Stronger enforcement: The Small Business Commissioner will be given expanded powers to investigate, adjudicate disputes, and take enforcement action (which will include fines).

If you are working in the construction sector, you should also be aware that the Bill is looking to ban retentions in construction. 

This means that the legislation would ban the deduction and withholding of retentions under a construction contract, to prevent loss through insolvency and unfair payment practices.

These are just the headlines. I know businesses of all sizes have questions about how certain elements will work, when they will come in, and the impact they might have. 

That is why, in my column for Startups.co.uk over the next few months, I will be breaking down what you need to know, the impact it will have on how you do business, and what you can do today to prepare. 

I want these developments to change the culture of late payments for the better. 

Small firms tell me they spend too many precious hours chasing debt. This is limiting their capacity to focus on growth, and I want to change that.

This content is contributed by a guest author. Startups.co.uk / MVF does not endorse or take responsibility for any views, advice, analysis or claims made within this post.