Issy Bainbridge, a specialist debt recovery lawyer at Holmes & Hills Solicitors, discusses the Federation of Small Businesses' recent findings.
According to the Federation of Small Businesses’ (the “FSB”) recent survey, more than 400,000 small businesses have had to shut down since the start of the pandemic, with a similar number now facing a real prospect of being insolvent in the near future due to a considerable increase in invoices being paid late or not at all, often by large FTSE businesses.
Small businesses employ more than 13 million workers in the UK and face battles to keep the business operating after struggling to pay suppliers, wages, and other bills on time whilst encountering long waits to be paid by customers. The threat to the viability of some small businesses will continue to grow over the next three months following a hike to various tax bills, spiraling energy bills, and an increase in the national living wage.
In order to try and ease financial tensions, the FSB has said that every big business and government organisation should be abiding by the prompt payment code that currently sets a 30-day term for good practice. Further, the FSB wants every big UK corporation to have a non-executive director on its board with direct responsibility for payment culture. In response to the current circumstances faced by small businesses, a government spokesperson has indicated that reforms are being considered, “including halving the payment period in the prompt payment code and consulting on fines”.
The FSB survey correlates with our own experience as we are already noticing an increase in instructions concerning unpaid invoices as we enter 2022.
Where invoices relate to the supply of goods and/or services between two businesses, statutory interest can be claimed against the debtor under the Late Payment of Commercial Debts (Interest) Act 1998 (the “LPA”) (in the absence of terms specifying otherwise) at a rate of 8% per annum above the Bank of England’s interest base rate which has recently increased from 0.1% to 0.25%. In addition to this, statutory compensation can also be sought at the applicable rates as specified within the LPA
It goes without saying that cash is king for any business and prompt payment of invoices is critical for cash flow. If you are not being paid, other businesses are likely facing the same uphill battle, and it is those businesses that act swiftly on late payment who get paid first.
We are familiar with the tactics used by businesses to avoid payment and can advise you on the merits of any claim and the swiftest route to recovery. Although it can seem appealing to instruct a debt agency, they are only able to carry out preliminary steps in pursuing your debt, whereas solicitors are able to go beyond this and advise on the most appropriate route you could take and guide you through the process from start to finish.
As we start a new calendar year, it is an opportunity for businesses to review any aged debt, and the Holmes & Hills' specialist debt recovery team is on hand to discuss the options available. The sooner you act the greater chance you have of maximising your recovery for the full amount you are entitled to!