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A UK businessman has decided to launch the PACT Scheme to help British small to medium sized enterprises (SMEs) in the fight against late payments. kinex looks into the initiative.
Online news portal SME Insider quotes figures which show that late payments are a pressing problem for small businesses in the UK. The average cost of late payments to UK businesses is £31,901 and small business owners now spend an extra £677 every month on chasing down late payments.
British businessman Chris Hawthorn set up a property marketing company in 2005, but it went under due to the growing burden of bills going unpaid. This inspired Hawthorn to set up the PACT (Please Abide Contract Terms) Scheme. It’s designed to allow small businesses to sign up to a set of pre-agreed procedures which will help them maintain good relationships with suppliers, while giving them the support they need to recover debts.
Commenting on PACT, Hawthorn said: “Late payments had a crippling effect on [my] company. I was forced to invest personal savings into the business, which damaged relationships with my own suppliers by paying them late. Not having the necessary finances in place also resulted in lost productivity through time spent chasing unpaid invoices… this resulted in the business failing.”
Continuing, he suggested: “This experience means I am very passionate about the burden late payment puts on small businesses. This could stop entrepreneurs being able to add an additional employee to the company, pay their overheads or make payments on existing loans. This is why I’ve decided to start the PACT Scheme to support SMEs in the fight against unpaid invoices.”
PACT will provide SMEs with three avenues to recover late payment. First, it’ll give them the ability to mediate with clients who haven’t paid their invoices. Second, it’ll give them access to credit reference agencies who can impose credit score penalties on suppliers that still refuse to pay invoices on time. Third, it’ll allow SMEs to list repeat late payers on Defaulter.com, which shares the company’s name, web address, the amount they owe and due date of the payment.
The PACT Scheme could be a welcome relief to SMEs across the UK. A small business with limited cash flow can’t afford to let unpaid invoices slide, as they’ll lose the cash flow needed to run their company day-to-day. PACT will give SME owners a range of options to recover missed payments, while maintaining positive relationships with the suppliers who bring business their way.
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