• The power to order companies to pay their suppliers when a complaint against them for late payment has been investigated and upheld
• The power to fine companies who continue to breach the rules
• The power to “compel companies to share information during an investigation by the SBC”
• the power to launch investigations into suspected bad payment practice, without the need to have first received a complaint from a small business.

Commenting on the measures, Small Business Minister Paul Scully said the Government is “seeking to create a culture of prompt payment in UK business”.
“Late payments are a terrible burden for small businesses, not only disrupting their cash flow but posing a threat to their survival in many cases,” he said. “We are committed to tackling this problem, supporting small businesses at this critical time for the British economy by helping them to secure payment on time.”
Welcoming the plans, National Chairman of the Federation of Small Businesses (FSB) Mike Cherry added: “We know that paying small businesses late is debilitating, and the practice has increased during COVID-19. It deprives small firms of cashflow, holds back growth, undermines productivity and forces many to take out external finance.
“In thousands of cases a year this causes the closure of small businesses. It is therefore more important than ever to wipe out this poor payment scourge. The proposed new powers would give the Small Business Commissioner some teeth to investigate bad practice more easily and punish it more severely, and it is very welcome to see these plans being put forward for consultation.”
The proposals follow news that the Prompt Payment Code – the set of guidelines designed to stamp out late payments – would be reformed to better support small businesses.
Announcing the reforms, a Department for Business, Energy and Industrial Strategy spokesperson said: “Whilst we believe these remain important principles, we also believe that reform could improve the Code.”
For help and advice dealing with late payments, please get in touch with our expert team today.

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• Full trading name
• Registration number
• Address(es)
• Key contact details

Undertaking these checks is no guarantee of payment, of course, but it allows a business to make informed decisions about the terms and conditions associated with each transaction.
As part of this review process, it is worth creating a watch list of potential late payers who can be carefully monitored so that action can be taken to prevent late payment. 
Foster positive working relationships
Obtaining payment isn’t just a process of making demands or threats. Creating a lasting, positive relationship and clear channels of communication can go a long way in helping to obtain timely payments. 
It doesn’t hurt to make courtesy calls to confirm receipt of paperwork or in advance of the invoice due date. This shows that a business is friendly and professional and allows a customer to give prior warning of late payment.
Be quick, be accurate
It isn’t just the responsibility of customers to ensure payments aren’t late. Ensuring your invoicing procedures are effective can make a massive difference. It is recommended that businesses: 

• Send invoices as soon as orders are fulfilled
• Email or send invoices electronically rather than sending by post
• Ensure that the invoice is addressed to the right person
• Make sure that there are no mistakes in the invoices
• Confirm that the invoice has been received

Acting early prevents delay and helps to build a rapport with your customer.
Incentivise 
Businesses struggling with late payments could look to add incentives to the credit-control process.
This could be something as simple as offering early settlement discounts to customers that are known for late payments that kick in when they pay within the agreed credit terms.  
While this may seem like rewarding bad behaviour, it may mean that your business is paid sooner. These incentives can also be incorporated into your pricing structure so that profit margins are not affected. 
Make payments easier 
There has never been more choice when it comes to payment methods, so businesses should make sure that they can offer as many as possible. This may include: 

• BACS
• Credit/debit card
• Cash
• Online payments, such as Stripe and PayPal

Seek support and advice
If your business is continually blighted by late payments and you are struggling to deal with the burden of credit control then it may make more sense and be more cost-effective to seek out professional support.
Outsourcing your credit control to an accountant could drastically improve your chances of being paid on time and it should give you an idea of how your cash flow is affected by expected late payments. 
This will help you to make informed decisions about your business that allow you to plan for future investment or make necessary cost cuts. 

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• Predict sales performance
• Estimate cost and spend expectations
• Indicate when cash will come into and leave a business

Armed with this information, a business will be able to make important decisions in the knowledge that it can react effectively. 
As a minimum, a business should look to compile a 30, 60 and 90-day cash flow forecast, but longer forecasts can also be useful up to a point.
Be aware that long-range forecasts may be less accurate as they will not be able to take into consideration future changes to business rules or the economy.
Preparing a forecast
The first element should be a sales forecast. This is the starting point of a profit and loss forecast, which can then be used to create a comprehensive cash flow forecast.
A sales forecast will include an estimate of how much you expect to sell in the future, normally broken down by month.
To create these estimates, you should look at your previous year’s sales figures to see whether there are any trends or seasonal variations. 
You also need to take into consideration the introduction of new products or services and the expected market for these.
Additionally, if you plan to make more sales in a particular area, build that into your forecast. This should include any new contracts or retained work that is anticipated during this period. 
At this stage, do not include any tax on the products or services sold as this will be incorporated later into the cash flow forecast. 
The next stage, a profit and loss forecast, combines your business’s income and its costs to give you a projected profit figure for the future. By preparing this you should be able to:

• Estimate how much tax the business will be liable for
• Understand the costs of launching new products
• Gain an indication of loss-leading products and/or the first indications of negative cash flow

Be sure to include costs in the month that you incur them, rather than the month that you pay for them.
All cash flow forecasts are prepared based on payment dates, but a profit and loss forecast must be prepared based on when you incur your costs.
At this stage, you can estimate and include VAT costs into the forecast. However, large one-off costs should not be included until the final cash flow forecast.
Using the information gathered so far you should now be able to build up an idea of cash flow within the business and prepare an accurate cash flow forecast that takes into consideration sales, profit and costs. 
Drawing up these forecasts for your business needn’t take long, but it doesn’t hurt to seek professional assistance to ensure that forecasts are accurate and so that you have the advice to act on the information you receive. 
With the advent of the latest cloud accounting technology, it has never been easier to effectively and accurately forecast cash flow.

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• A review of the recent financial performance of the business. You will need to provide cash flow forecasts, recent financial statements, and management accounts that show the fiscal health of your business prior to the Coronavirus outbreak.

  We are working with clients to prepare his supporting information, please contact us if we can help you.

  The projected financial performance of the business for the current and next financial year.
  This is likely to include:

  a) The projected performance based on “normal” pre-Coronavirus trading
  b) The expected performance of your business based on the impact of the Coronavirus crisis

In order to ensure that your business stands the best chance of successfully securing a CBILS loan, you need to ensure that you have accurate business documentation.
We are able to assist you with detailed accounts for the last two years, plus up to date cash flow forecasts, management accounts, performance forecasts for the current and next financial year and any other supporting documents you will need to support your application.
Please contact us for help and practical support.

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• Agreeing an instalment arrangement for the payment of outstanding taxes;
• Suspending debt collection proceedings;
• Cancelling penalties and interest where you have administrative difficulties in contacting or paying HMRC immediately

What are the criteria for obtaining a Time to Pay arrangements?
Time to Pay arrangements in general are covered by a series internal HMRC manuals, parts of which are heavily redacted.
It is not clear at the moment what criteria HMRC is using with respect to requests for Time to Pay arrangements in circumstances where an individual or business has been affected by the impact of coronavirus. However, the Government has indicated that HMRC’s approach will be more lenient in these circumstances.
HMRC’s general guidance is that it will normally only provide Time to Pay arrangements in where a business or individual “Can’t Pay”, as opposed to where they “Won’t Pay”.
HMRC will ask a series of questions over the phone in order to determine whether someone “Can’t Pay” or “Won’t Pay”.           
What might I need to provide?
According to HMRC’s manuals, “Can’t Pay” or “Won’t Pay” status can sometimes be determined only on the basis of a phone call but, at other times, will require detailed cash-flow forecasts before proceeding.
For corporate debt, HMRC asks questions including:

• why the company cannot pay
• what the company’s banking facilities are
• what the company has done to raise money
• what the company does
• what changes the company is making
• what debtors and creditors the business has
• what the company thinks they can afford to pay
• how the company thinks they can repay the debt and pay their on-going liabilities on time.

Meanwhile, individuals will be asked to provide a detailed breakdown of their household expenditure.
HMRC will use this information to determine:

• your financial viability
• the likelihood of a Time to pay arrangement succeeding, and
• suitable enforcement options if Time to Pay is not successful or can’t be agreed.

How we can help
We are able to assist you in making a case to HMRC for Time to Pay support, including the preparation of evidence to support your case. Contact us today to find out how we can help.

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1. Frequency of staff wages

Some industry sectors traditionally pay their employees weekly or fortnightly but this can have a negative impact on your business cash flow, particularly if your terms of business allow customers 30 days to pay. Regular late payers or clients who are themselves struggling with cash flow, can exacerbate the situation.
Now may be the time to talk to your staff about moving to monthly salary payments.

2. Consider turnover issues

Clearly turnover will be important for your business, but you need to ensure that you do not fall into the trap of ‘over-trading’.  Blindly chasing turnover can be risky because of the up-front costs you will inevitably incur. What happens if payments are not received until weeks or even months down the line? How will your cash flow be affected as a result?
No-one wants to turn away business in the current economic climate but you may wish to consider asking for advance payments to cover materials and supplies.

3. Equipment purchases and capital expenditure

Think carefully about committing to purchase any large pieces of equipment which could take a chunk out of your capital reserves. If the equipment is necessary to keep your business going, consider a hire purchase agreement or bank loan so that you can offset the cost over a number of months or even years.

4. Overheads

Take a good, hard look at your fixed overheads. Now might be the time to outsource your payroll and HR services to minimise the fixed costs of having in-house staff. Freeing up funds in this way, leads to a leaner working practises so that your business can remain flexible with a focus on staying profitable.

5. Pricing review

Under-pricing your goods and services to attract new customers is a tactic used by many businesses. In the short term, it keeps the work rolling in and your staff busy. But the ‘keeping busy’ strategy only works for so long. In the longer term it can be detrimental to your business model. Your customers will become used to paying the initial low price, making it much harder for you to then justify increasing the cost. Very soon you could find yourself providing goods and services as a loss leader which will lead to your business leaching money.
Try not to give into the temptation of under-pricing the work you do. Focus on the superior service that you are able to offer rather than being price-led.

6. Credit control

Every business suffers the pain of late and slow paying customers. The current coronavirus crisis means that many more suppliers may default on their payments, leading to a knock-on effect for your business cash flow.
Now is the time to ensure that your credit control function is working efficiently. If you don’t have a dedicated in-house facility, you can outsource this business function in the short term to help your business ride the economic storm. A good credit control system is reliant on your business issuing invoices without delay so that any lapses in adhering to terms of payment can be followed up as soon as they become due.
As a business owner you will know that balancing the books and ensuring that your cash flow remains healthy, is critical to ensuring your business not only survives but, in the long term, thrives.
For help and support with all aspects of cash flow, payroll, management accounts, credit control and business financing, please contact our expert team today.

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