I've banged on quite a bit over the years about how useful the UK's late payment legislation can be to small businesses and freelances. Getting paid on time increases income and general happiness!
There are some interesting developments as the EU prepares to introduce minimum standards across all member states next year.
For late payment anoraks like me I'd recommend all the links relating to this at payontime.co.uk. They have a discussion forum on the site too.
It's great that the EU is addressing the problem of payments, and nice to see them catching up with the UK on this.
I've just submitted two areas of concern as part of the consultation process which the Department for Business Innovation and Skills is holding. (Deadline alert: 19 October 2012)
Here's my submission in full:
As a trainer who works with freelances and small business owners on organisational skills, I have championed the UK’s late payment legislation for more than 7 years now.
While I welcome the adoption of legislation across Europe, there are some worrying details in the proposed changes.
Although it’s true that the late payment legislation is not a solution to the problem, for very small businesses (sole traders, partnerships, micro companies) it does more than just “create an environment for driving payment on time” (as stated in the BIS consultation document).
For these small businesses it provides a benchmark and allows them to point to an example of a minimum standard of professionalism they expect from their clients.
There are two areas which need addressing in the proposals:
1/ The replacement of the tiered statutory admin fee from £40, £70 or £100 to a flat €40 (approx £31)
This may seem a small change, but for very small businesses every penny counts. The message this sends is that the disruption and inconvenience has no real value. It looks like a token gesture.
In reality it’s more than just a token for very small businesses.
It is not good enough that suppliers may be able to argue for more realistic compensation under the proposals (“reasonable additional costs incurred”). Many small suppliers are at the end of their tether by the time they invoke the legislation. They will not all have the time or resources (or courage) to try to extract more from a bad payer.
We propose that if a single flat fee has to be introduced it is set at a minimum of €100 (not €40), with allowance made for other “reasonable additional costs” as proposed.
2/ The maximum 60 day payment terms for business to business contracts
The legislation attempts to make allowances for different types of contract (business to business, public sector). However the effect is to reduce the clarity of the message to tardy payers.
The default payment term (where not otherwise agreed) is to remain as 30 days. This is right and proper.
The proposals allow for payment terms of up to 60 days, unless agreed otherwise by both parties. So why state 60 days as the default in this section and not 30 days?
For small businesses an extra month without payment can be very painful, and sometimes terminal. The spirit of the legislation should be that there is no excuse for not paying suppliers once they have delivered, and that 30 days is considered the normal maximum in all cases.
We therefore propose that the default payment terms are set clearly at 30 days for business to business contracts, with the option of negotiating longer (or shorter) terms in advance of the supplier undertaking the work.
David Thomas Media
11 Oct 2012
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