Small business plan puts late payment under scrutiny

The government has set out further steps under its Small Business Plan, with late payment, regulatory reform, tax simplification, e-invoicing, and finance access at the centre of the next phase.

ICAEW said the update marks one year of progress on the plan and gives businesses, advisers, and accountants more detail on the policy timetable ahead. The main areas include legislative action on late payments, a continued drive to simplify tax administration, further work on e-invoicing, and funding initiatives linked to the British Business Bank.

Late payment remains one of the most persistent problems in the small company economy. For smaller suppliers, delayed invoices can restrict hiring, stock purchases, marketing, tax payments, and investment. Larger customers may treat extended payment cycles as working capital management, but the effect can push cash pressure down the supply chain.

The update therefore has a practical finance dimension. Measures that improve payment behaviour can reduce reliance on overdrafts, invoice finance, personal guarantees, or director loans. They can also improve the quality of management information by giving companies more predictable cash conversion.

The plan also intersects with the government’s tax and digital administration agenda. ICAEW’s update points to e-invoicing as a continuing area of work, alongside wider tax simplification. The government has already confirmed that Peppol will be the core interoperability network for UK e-invoicing, as part of a move towards more standardised digital invoice exchange.

For smaller companies, the value of e-invoicing is not limited to faster paperwork. A well designed system can reduce errors, speed up approvals, improve audit trails, and give finance teams a clearer picture of outstanding liabilities and receivables. A poorly implemented system can become another compliance burden for companies already managing payroll, VAT, pensions, Making Tax Digital, procurement portals, and customer specific invoicing rules.

The update arrives as tax choices confront the Burnham government, with ministers seeking to support enterprise while maintaining fiscal credibility. Small company support is politically attractive, but it has to be delivered through systems simple enough to use and funded well enough to endure.

Access to finance remains another central issue. Smaller companies often face higher borrowing costs, limited collateral, and thinner cash reserves than larger organisations. When confidence falls or costs rise, lenders can become more cautious just as working capital needs increase. Government backed finance routes can help, but awareness, eligibility, and application complexity determine whether support reaches viable companies in time.

Regulatory reform adds a further layer. The challenge is to reduce unnecessary friction without weakening protections around employment, tax compliance, consumer rights, data, safety, or fair competition. The burden rarely comes from one rule in isolation. It comes from the cumulative effect of many processes handled by a small management team.

That cumulative burden has increased as companies have become more digital, more regulated, and more exposed to cyber, fraud, employment, and supply chain risk. A business with 15 employees may now have to manage digital payroll, pension auto-enrolment, right to work checks, data protection, online sales compliance, insurance requirements, payment disputes, software subscriptions, tax submissions, and customer procurement systems.

Late payment reform can have a stronger economic effect than its administrative appearance suggests. Reliable payment gives companies greater freedom to invest, hire, and negotiate with suppliers. Repeated chasing of invoices consumes management time, weakens confidence, and encourages more conservative growth decisions. Payment culture therefore affects productivity as well as cashflow.

There is also a fairness issue. Smaller suppliers often lack bargaining power when negotiating payment terms with large customers. Stronger enforcement, transparency, and dispute routes can rebalance that relationship, but only if they are easy to access and do not expose suppliers to commercial retaliation.

The next phase will be judged on implementation. Small companies have seen many programmes promising simplification, yet the benefit depends on whether systems become easier to navigate, whether finance reaches viable applicants, and whether late payment rules change behaviour inside large buyers.

The plan gives a useful framework for policy direction. Its economic value will depend on reducing the practical friction that stops smaller companies turning demand into growth: late cash, complex compliance, uncertain finance, and limited management capacity.