If Myrddin, or Merlin, the boy wizard and court magician of ancient Welsh legend, returned to his homeland today and appeared before one of my small business owning friends and offered them one wish, I know what many would choose.

“If it’s not too much trouble, Myrddin,” they’d say, “it would be great if you could wave your magic wand and cast a spell to make sure that we got paid on time.”

Doesn’t sound much – but it is.

That’s because the scandal of late payments is the biggest threat to business viability – especially for the smaller businesses – and sometimes it seems that only a miracle will fix it.

It is heartbreaking that so many businesses are strangled at birth, not because they are unviable; or badly run, or they have no customers – but simply because slow payments chokes their cashflow and makes life impossible. Smaller businesses will often have fewer resources to follow up on unpaid invoices, and what might appear to be a small amount owing can have a huge impact on a small business’ ability to grow, or even to survive.

According to data from the Small Business Commissioner, a third of payments to small businesses are late, and if small businesses were paid on time, this could boost the UK economy by an estimated £2.5bn a year. The time is ripe for reform on this issue, and while some progress has been made through regulation, change takes time.

That is why ACCA responded to a recent consultation on changes to the regulations on Payment Practices brought in in 2017, and it’s why we shared our belief that more must be done to fix this crisis. Our view, as well as analysis by a wide range of organisations such as insolvency bodies, suggests that late payment is still a massive problem. Our research shows that problems securing prompt payment increased sharply in the second quarter of this year and are high compared to the historical average. Problems securing prompt payment are slightly higher for UK SMEs than for all UK companies.

One of the most troubling aspects of the late payments issue is that it’s the big beasts in the business jungle which are most often at fault. ACCA members tell me that late payments from larger companies have the most detrimental impact on the stability of small businesses. I spoke to a small business owner recently who spent a day a week on chasing payments – that’s time that could have been spent developing and growing the business, rather than protecting the business’ cashflow.

I know there are honourable exceptions, but it is generally the larger companies – those with the most resources in terms of cash and systems to settle accounts on time – that so often create the biggest headaches. At the most extreme end, businesses paying late is seen by some as ‘free cash’, but there are also issues of small businesses interacting with larger organisations’ complex internal finance systems or with finance teams who don’t appreciate the impact that an unpaid invoice can have on a small business – it may affect growth plans, or even on the headcount in a small business. Late payment from big firms creates a domino effect throughout the supply chain, in turn stopping smaller businesses from paying others on time.

In recent talks with the Small Business Commissioner and MPs, ACCA members called for a stricter framework to govern payments – and offered a plea that legislators and regulators should treat it as a critical issue.

ACCA has supported action to tackle late payment in recent years, including the introduction of reporting requirements, the Prompt Payment Code, as well as the establishment of the Small Business Commissioner back in 2016.

We believe that improving poor payment practices requires change on a number of fronts, including changes in culture, increasing awareness of the impact of late payments and enabling scrutiny, as well as law changes to strengthen existing regulations.

Indeed, as we seek to pull every lever to create the best environment to enable the economy to flourish, we believe we should include payment performance in supply chain reporting; maximise the information available to small firms; and enhance the powers of the Small Business Commissioner.

In recent research among MPs, conducted by YouGov for the Association of Accounting Technicians and ACCA, we found cross-party agreement that more action is needed to support SMEs in relation to payment issues. Our survey of MPs found:

  • 65% agreed that the Prompt Payment Code should be compulsory for organisations with more than 250 employees
  • 54% agreed that the Small Business Commissioner should be given powers to impose financial penalties for persistent non-compliance with the Prompt Payment Code

If we can achieve all or even some of those reforms, there will be no need to raise Myrddin from his centuries of slumber and beg his help.