The significance of on-time payment hardly needs to be pointed out, but the role automated Accounts Payable (AP) systems play is often overlooked. An unreliable AP system can cause payments to be missed. With new UK measures set to severely punish late payments to SMEs, it is more important than ever large enterprises invest in an AP system they can trust.
Large businesses have always had a responsibility to make their due payments to small and medium sized enterprises (SMEs) on time. This is because failure to do so can cause considerable upheaval through the economy, with SMEs often struggling when payments for services and goods provided are made late or missed.
These businesses can suffer more greatly than their larger counterparts when payments are not received, often facing difficulties making their own payments as a result. It is estimated that this issue causes some 50,000 SMEs to go out of business in the UK every year. With figures available from the Federation of Small Businesses 80% of small businesses are paid late, with an average of £6,142 owed to them, and with about 5.7 million SMEs in the UK, some £13 billion is owed in total.
Now, with the introduction of significant new steps aimed specifically at stopping large enterprises from defaulting on their obligations, there is an urgent need to adopt procedures that ensure accounts payable are managed better than ever. With the right automated AP system, this can be done.
The New Late Payment Measures
In June, the UK’s Small Business Minister, Kelly Tolhurst, announced that large businesses can now face strict punishment including stiff fines for failing to pay smaller suppliers on time. Several measures are being introduced, but the 3 most significant are:
The Small Business Commission was established to protect the specific interests of small businesses, not least to tackle the specific issue of late payments received. In order to protect these interests, the Commissioner (Paul Uppal) could be given the power to hold offending businesses to account. These powers include:
The Prompt Payment Code – a voluntary code of best practice – will also be moved to the Small Business Commission so as to ensure the Commissioner can effect culture change where there are unfair payment practices.
In the past, this was largely considered a departmental issue, and one that the Financial Officer would focus on. However, the onus is now set to be placed on the Board itself. This is designed to ensure greater transparency and accountability. Audit Committees will also be expected to include payment practices in their annual reports to the company.
Their Payment Practices Reporting Duty, which already obliges large enterprises report payment practices twice a year, will now be enforced strictly, with tougher action – including heavier fines – set to be handed out again companies that do not comply with the legislation.
The best way to avoid late payments, and the costly consequences that are now set to follow them, is to have a reliable and cost-effective Accounts Payable system. The technology involved can ensure issues are removed by simplifying every aspect, not least the invoicing, payment and credit management of operations.
3 Kefron AP Features That Help Avoid Late Payments
Automated Invoice Approvals
Invoice approval is a critical part of any payment system. Kefron AP automatically notifies designated approvers allowing them to make approvals anywhere, streamlining the system to a matter of minutes.
Real-time reports can provide invaluable, up-to-date information. It’s even more valuable when real-time reports are available at each stage of the accounts payable process, making it easy to answer queries or simply keep track of an invoice’s journey.
Kefron AP can synchronize with your existing accounting software, so there is zero disruption when installed and smooth exchange of information once it’s done. Nothing falls between the cracks because there are no cracks to fall through.