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Payment disputes and late payments are major issues for small businesses, which can lead to cashflow problems and in extreme cases even threaten a company’s survival. The Federation of Small Businesses (FSB) has recently highlighted the issue and called for the system of resolving disputes to be made simpler, with greater use of alternative dispute resolution. The Government has promised to take action, but will the measures be enough Here we look at how payment disputes are causing serious problems for many UK businesses, and ask what can be done to ease the situation.

Late Payments and Disputes

A recent report by the FSB revealed that small companies across England and Wales are losing out by more than £11 billion annually because of business disputes. Around 7 in 10 businesses have been involved in at least one legal dispute over a five-year period, with nearly 75% of these cases involving payments. Some small companies even end up closing down as a result of clients not paying.

According to the latest available Government figures, the late payments owed to small and medium businesses in June 2015 amounted to more than £26 billion, giving some idea of the huge scale of the problem. It is believed that prompt payment could prevent thousands of small companies from closing down each year, saving jobs and contributing to the economy.
What Action is Being Taken?

The Government is appointing a Small Business Commissioner, who will start to support small businesses over payment issues in the autumn of 2017. A consultation has been taking place over exactly how the new commissioner will operate.

Other measures are also being taken during 2017 to crack down on larger businesses who take too long to pay their bills to small companies. Starting in April, a new “Duty to Report” means that large companies will be required to publish information twice a year over their payments record, including the average time taken to pay invoices.