Tag Archive | "late payment"

Contractors to Finally Get Paid on Time…Maybe

I reported right here on this blog about how contractors spend an average of 20 days a year chasing clients for late payments. Sometimes they never get paid.

This led the government to step in and announce they would setup a special branch that is focused 100% on making sure contractors, the self employed, and small business owners get paid on time.

To be honest I doubted if they would actually go through and take action, but it looks like they have.

From last week, all large companies and limited liability partnerships will now have to share details of their payment practices with the government, and if they don’t, then they can expect to get punished and even be put out of business.

Not only that, but contractors who are finding it difficult to get paid by clients can go directly to the government to get things sorted.

Why are the government stepping in now? Well, I think they have just realised how much of a problem late payment is…with one report suggesting that self employed workers in the UK are owed £26 Billion pounds in overdue payments as we speak.

That is definitely not small change, and if big companies keep getting away with not paying contractors the money they are owed then it could start to become a real problem for the economy.

If the government don’t take action then it might lead to an economic meltdown, not something we want as Britain leaves the European Union.

The main information that large companies are now required to share is their average payment time for invoices. If they are taking too long then a government official will be demanding to know why.

Right now, it is only companies who have a turnover over 36 million a year or a balance sheet of over 18 million that will have to report on details of their payment practises, but as time goes on I think that smaller companies might have to do the same as well.

This ensures that contractors get paid on time by all of their clients, and they can even check to see the payment record of a particular company before agreeing to work with them.

Will this completely stop late payments for contractors though? Unfortunately not, as there is always a few companies that try to game the system and get around the rules.

Also, it remains to be seen if the government actually enforce the rules and punish companies that don’t pay contractors on time. They might take action for a few months to grab some headlines, but then start to ignore it after a while.

Hopefully this won’t happen, and contractors can finally get paid the money they are owed. At the end of the day, £26 Billion pounds owed is just way too much, and something needs to be done about it.

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Boss of Twitter Launches Payment System in the UK

We all know how frustrating it can be for small businesses, freelancers, contractors and gig workers to get paid by clients, but there could be a solution.

It’s called “Square,” which is a payment system that connects to your smartphone or tablet, which then makes it easier to collect payment from clients.

Gone are the days of waiting around for weeks on end to receive a cheque in the post. These days, all you have to do is turn up at a clients office with your smartphone or tablet. “Just give me your credit card details and I will be on my way,” you say, before walking away with a completed payment.

This new payment system called Square was actually created by the guy that invented Twitter, so you can imagine it has been getting a lot of attention, as well as a decent amount of finance to push the system out there.

In America Square has already been a big hit, and now they are hoping the same thing is going to happen right here on UK shores. Will the British self employed embrace this new system though, or will they vote with their feet by ignoring it.

My opinion? I definitely think we are going to be seeing more and more people using these smart reader payment systems in the UK, especially when you consider that many contractors and freelancers have trouble getting paid.

This has led the government to set-up a special branch that focuses on clients who don’t, or just won’t pay, and it wouldn’t surprise me if they are going to be soon encouraging entrepreneurs to use this type of technology in a bid to get paid on time, every time.

If you ask me, one of the main reasons why so many people find it difficult to collect money from all of their clients is because they are not comfortable with using complicated digital solutions.

For example, one option is to take credit card payments on your website, but for a lot of people this is just way too much hassle to get sorted.

On the flip side, if you can start collecting payments with the push of a button on your smartphone, then it makes the whole process of getting paid extremely simple, to the point where even someone who has never been on the internet before could do it.

With the Square payment service, small business owners will pay a transaction fee of only 1.75% of the total amount paid. Not only that, but the money reaches your bank account that very same day, so you are not waiting around to get cleared funds.

If you’ve ever struggled to get payment from customers and clients, then you might just want to give a Square a go.

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Government extends Prompt Payment code to help contractors

The Government has announced that it will be extending the Prompt Payment Code to help contractors and other sole traders cope with the horrors of late payment.

While Chancellor Osborne didn’t exactly go into detail how the Code will change on March 18th when he unveiled the Budget, in the days since the Government has gone on record with its intention of extending it further to help small business owners, sole traders and self-employed Brits by using supplier lists, legally obligating large firms to publish their payment histories in regards to timeliness and improving the transparency of its own payment practices in order to give the Prompt Payment Code some sharper teeth. Any firm that’s a signatory to the Code has a 60 day maximum when it comes to payment terms that they’ll have to abide by unless they want to face the tender ministrations of the Government.

Late payment of course has been a thorn in the side of sole traders, contractors and freelance workers for more or less the invention of money. It’s a constant pain in the arse  and it’s exceedingly widespread, with the Federation of Small Businesses discovering in one of its countless research studies that 20 per cent of small firms have been victimised by larger companies when it comes to payment practices – and late payment is one of the chief ways these large firms take the piss out of their smaller brethren.

So is this new version of the Code going to make much of a difference? Well for what it’s worth it can’t make things much worse. Only around 21 per cent of FSB members thought the Prompt Payment Code actually worked well as it stood before the announced change, so I suppose there’s room for improvement there. Of course with confidence so low there’s really no other way to go but up is there?

Honestly I can’t say I’m surprised that things have gotten so bad that the Prompt Payment Code has had to have been given an update. Large firms are the closest thing you can get to evil incarnate without drawing an esoteric sigil in blood and chanting Satanic hymns in the ruins of a burned-down church on Halloween Eve in order to summon demons from Hell, after all.

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Enough with late payment to contractors, industry bodies say

Trade industry bodies have come out of the woodwork lately demanding an end to late payment, one of the major thorns in the side of the self-employed in the UK.

It was a veritable who’s who at a Federation of Small Businesses-led cross-parliamentary round table recently, with representatives from the Institute of Directors and the Association of Independent Pofessionals and the Self-Employed all in attendance. Between the FSB, the IoD, and the IPSE, the alphabet soup of industry bodies came together over the importance of stopping late payment – one of the biggest ways large firms can bully SMEs, sole traders, and freelancers like umbrella company contractors.

It happens all the time – a big fish client or customer often has a sole trader come in and do some work for them, then drags its heels for weeks or even months in paying the worker for his or her time and effort. The prevailing thought at these large-scale firms is often little more than ‘they can wait,’ as there’s usually little to nothing a single entity can do in encouraging a massively sized company from making good on its promises. It’s all about power – and with contract workers not having much in this arena, the big fish more or less does whatever it wants, damn the consequences.

Some people say that it’s not really a problem, but these people are obviously idiots. In fact, the FSB has data to back up that claim – well not that they’re idiots, but that the problem of late payment is bigger than most people think. The IoD and the IPSE backed up the FSB on all points, going so far as to say that late payments to SMEs jeopardise the economic recovery in the country – especially in light of how much of a contribution SMEs have been making to the economic recovery efforts in the UK for years now.

For what it’s worth, it’s time to stop letting big firms walk all over what they see as their lowly contractors and interim workers. It’s high time that the contributions of SMEs are recognised and supported, and I’m all for throwing the full weight of the Government behind the idea of ending late payment and other sorts of bullying behaviour. Contractors and freelancers work way too hard to have these big firms take the piss out of them constantly in this way, and it makes me furious to think its’ still going on and nothing has been done about it even now.

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Limited company contractors get tough on debtors

Private sector suppliers, including limited company contractors, are focusing increasingly on their cashflow and threatening clients with legal action if they do not settle their invoices in a timely manner.

Lovetts, a debt recovery firm, reported recently that the average timespan from invoice date to ‘letter before action’ is now 68 days; down from 72. Suppliers’ willingness to wait for payment has now been decreasing for the last three consecutive quarters.

Lovetts’ MD, Charles Wilson, said that suppliers have adopted an attitude of debt is debt and it makes no difference who the customer is. He suggests that last year’s forbearance has now run its course and suppliers are getting tough on any late payers.

He went on to explain that last year, businesses gave customers much more leeway before threatening legal action in order to maintain a good working relationship.

However, companies must make sure they carry out their threats and pursue a legal claim. If they don’t follow up, they will be accused of crying wolf.

80% of businesses that send letters warning debtors of recovery action do secure payment, so they are an effective deterrent. But with debts to SMEs totalling a record £33.6 billion, suppliers must demonstrate that they mean business when it comes to chasing overdue invoices.

Bad debts are not the only problem facing UK SMEs at the moment.

Global recruiter Hays conducted research that discovered that 55% of jobseekers think they could get better benefits working for a larger organisation, and 52% are concerned that smaller firms lack stability.

Small businesses need to attract skilled and talents personnel in order to remain competitive and employers should take the time to explain the direction the business is heading and future growth opportunities to potential recruits, Hays director Charles Logan said.

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UK umbrella company contractors unhappy with personal taxation

The Times newspaper recently asked readers to rank the UK against five key competitors for tax, business friendliness, infrastructure, skills and workforce.

It will probably come as no surprise to learn that voters ranked the UK last when it came to personal and business taxation. In fact that UK didn’t come out smelling of roses many categories!

On the plus side, 57% of respondents believe the UK is a better place than France to do business, and 56% said it is better than doing business in India. Voters were also reasonably positive about the British workforce’s skills and the quality of education, although Germany and France ranked higher.

On the down side, 70% believes the UK performs worse than the US on personal taxation and 75% says it has worse wealth creation taxes. In fact a mere 6% of the respondents said were happy with the rates of personal taxation in the UK and only 7% said corporation and capital gains taxes were good or excellent.

The US, China and Germany were all ranked above the UK when it comes to setting up and running a business. 23% said the UK was a good place to set up but 30% said it was either poor or very poor.

However, the UK coalition wants to make Britain more small business and limited company contractor friendly and plans to open up more contracts to smaller firms. The government has also been trying to crack down on the issue of late payment to help small businesses better manage their cash flow.

The CBI welcomes the coalition’s moves but warns that smaller firms still have a number of obstacles to overcome. Chief policy director, Katja Hall, has urged SMEs to focus on the long-term outcome when they bid for public sector contracts. To compete with the larger players, SMEs must think about the outcomes and what it is they hope to achieve.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Large corporations still appear reluctant to settle debts

London and the South East of England top the late payments league, according to the latest study from Bacs.

Nearly 400,000 UK enterprises suffer because of delayed payments and the average owed to one company at any one time is £27,000. Although more firms in the south of England are owed money, they do not have as much debt outstanding as companies in the Midlands who are owed up to £38,000.

Large corporations are responsible for the lion’s share of the debt. They owe £24 billion to British SMEs and in some cases invoice settlement is up to 52 days overdue. The public sector and not-for-profit organisations on the other hand improved their payment times in the last half of 2010.

33% of SMEs say big companies are behind overdue bill payments and those operating in the manufacturing sector are the most likely victims. 53% of UK SMEs have suffered late payment, up 8 percentage points from June last year. When they do eventually receive settlement it’s an average 39 days over the agreed payment terms and this rise rises to nearly 50 days overdue in the distribution sector.

The burden of chasing overdue bills is having an adverse impact on smaller businesses. They now need to devote half a day every week to chase payment, equating to over 158 million man hours the British economy loses just to pursuing overdue debts.

At the same time, the number of firms using Invoice Financing to help improve cashflow rose by 16% in the year ending April 2011, according to the Royal Bank of Scotland.

Mike Hutchinson, Bacs’ head of marketing, urges more SMEs to use automated payments if possible so they can better manage funds which are under their control.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Late payments continue to burden recruiters and contractors

Late payments increased by 16%, to 25.7 days, in the final quarter of last year, a situation which had an adverse affect on some recruitment companies.

The amount of recruitment agencies that went into administration increased slightly during quarter 4. In the third quarter of 2010, 9 agencies were put in the hands of the administrators compared to 13 in Q4. However, the Q4 figure was 28% down on the corresponding quarter the previous year.

Large businesses are still the worst offenders when it comes to late settlement, according to the most recent research from Experian. Although these large enterprises have reduced their bad payment performance, they still take an average 35.74 days to settle. Micro-businesses with just 1 or 2 employees tend to be the promptest payers at 20.47 days.

The problem of late payment can have a serious affect on the cashflow of small businesses. Recruiters and limited company contractors should stay vigilant and consider the worst case scenario.

David Grier from MCR, the corporate restructuring and insolvency company, advisers recruiters to think about ways of reducing rent, negotiating with HMRC to defer taxes and offer such reassurance to their bank as may be necessary to ensure that it will continue to make funding available.

Any company that is facing financial difficulties would be well advised to contact their accountant or business advisor immediately. Dealing with these problems straight away will give businesses a better chance of survival.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Contractors may have to wait longer for settlement

Rather than reversing the trend for late payments, a new directive from the EU could actually make matters worse, according to the FPB.

Many public sector organisations currently have a ten-day settlement target and the forum is concerned that the implementation of a standard 30 day period could cause those bodies to abandon speedy settlement. For example, recent FPB research shows that the NHS pays contractors within 10 days in 90% of cases. On the other hand, some organisations are unable to settle any invoices in 10 days and some struggle to pay 20% within 30 days.

Phil Orford, the chief executive of the FPB, agreed that the Late Payments Directive should help tackle the problem small businesses and freelancers are facing due to late settlement of invoices, which is currently thought to be costing the UK economy £24 billion.

However, he also pointed out that although not all public sector bodies have adopted the ten day payment rule, abandoning it would be a step backwards and could encourage those who currently pay up quickly to increase the waiting period for settlement.

Late payment of timesheets has become a real problem not only in the UK but across Europe as a whole. In Italy, the average public sector settlement time is a huge 100 days whilst private sector companies take an average of 66 days to pay their debts.

The FPB has long been campaigning for legislation to cope with the problem of late payment and the Prompt Payment Code was introduced to help combat the problem. However, signing up is optional and not many large businesses have pledged to settle in full and on time. And many small businesses remain reluctant to take on late payers through fear of losing the contract.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

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Who will police the police over late payments?

The latest public body to come under fire for late payment of invoices is the police force.

Despite repeated directives from the government, suppliers to some of the UK’s police forces have to wait over 2 months for settlement at a time when some SMEs are still facing insolvency threats, according to the FPB.

The best police forces settle their invoices within days but there is a huge gulf between them and the worst performers. The FPB say that some manage to settle over 75% of invoices within 10 days and virtually all are paid within 30 days. On the other hand, some forces settle less than 1% of their invoices within 10 days and more than 50% are still outstanding after 30 days.

Meanwhile it has been revealed that SMEs are now accepting excuses for late payment rather than chasing customers with outstanding debts.

A survey conducted by positivecollections.co.uk found that almost three quarters of SMEs accept late payment excuses. 10% of businesses don’t like chasing debts at all in case they lose business in the future and 17% would like to chase up debtors but think it is too expensive to start legal action.

Micro businesses fare reasonably well in the debt recovery stakes with 45% saying they always receive payment on time.

Although there has been an increasing trend towards late payment since the recession took hold, there are major concerns that SMEs cannot afford to suffer this kind of disruption to their cash flow and some may be forced out of business.

Whilst there will always be instances where late payments are unavoidable, this should never be accepted as the norm and businesses and contractors should try and implement measures to keep their credit control in good shape.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Painful Time [Explored- FP] by ShaZ Ni [pretty busy T_T]

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