Small Business Commissioner Paul Uppal is to recommend a traffic light warning system for business bills after new research into the scale of late payments.
The study by Lloyds Bank Commercial Banking, in partnership with the commissioner, found that in Scotland nearly one-third (31%) of payments owed to small firms by larger business customers are paid after 30 days.
Invoices are taking an average of 37 days to be paid to smaller firms north of the border, the research revealed. Although this is the same as the UK average, it is still well above the commissioner’s recommended 30 days.
The traffic light system proposed would help small firms to identify which large businesses habitually pay their bills late.
About £2 million has been secured for small and medium-sized enterprises around the UK since Mr Uppal took up his post in late 2017.
Mr Uppal announced the milestone during a recent visit to Aberdeen.
He said yesterday: “The effect of late payment on Scottish small firms can be devastating.
“It impedes business growth, but also has an impact on the lives and mental health of those running small firms.”
Legislation introduced in April 2017 required all large businesses in the UK to publish their payment practices.
Mr Uppal said: “Some businesses have now made two reports.
“The challenge now is to use the information to help small firms make sound decisions based on transparent information before deciding which larger businesses they should trade with.
“A traffic light system would be a simple and effective way of demonstrating which larger firms have structured their supply chain in such a way that it is more than an exchange of good or services but also resembles part of their financing model.”
He added: “Almost two thirds of payments are likely to be owed to smaller firms at any time.
“This is money that could be used to grow smaller businesses and generate tangible economic activity.
“Instead it is stuck on large firms’ business ledgers doing nothing.”