A PIECE in the money section of the FT on Saturday quoted a number of small business owners who described the Government's Prompt Payment Code as mere window dressing.

One even mentioned that one of the large companies signed up to the prompt payment scheme was one of their worst payers!

Of course, one of the big drawbacks of the scheme is that it is voluntary. Full marks to the ICM and the government for raising awareness of this serious issue......but will it ever make a difference? I very much doubt it. But then again, will government ever come to the rescue of SMEs who suffer tremendous cash flow difficulties because of the greed of the big corporates with muscle.

I think it's time for the government to act against large private organisations who find it difficult to forgo the obvious advantages of holding on to money that belongs to someone else i.e.smaller suppliers. Why should large organisations be able to unilaterally impose 90 days payment terms on suppliers when they demand their own invoices to be paid within 30?

How about this for an idea. government can appoint inspectors to do spot checks within the purchase departments of large organisations to check on the DPO (Days Purchases Outstanding).

If the figure looks particularly high, given that most business impose 30 days credit terms, a random check on some real invoices within the department can be undertaken.

Penalties could be imposed for any wrongdoing.

These things within a finance department would be very difficult to hide away from an inspector, so the spot checks should be very straightforward to achieve. Good idea or bad idea? I'd like to know your thoughts.

MORE RESEARCH has come to my attention from BDRC Continental on behalf of BACS, saying that SMEs continue to suffer from slow-paying bigger clients - average wait time - 39 days beyond terms.

There's nothing particularly earth-shattering about this news, although the research does pick up a big improvement in how public bodies pay their bills, while 33% point the finger clearly at larger private limited companies for being the worst offenders.

Slow payments of trade debts is an age old problem for SMEs, but in a "dog eat dog" world, will bigger private organisations ever decide to forgo the obvious financial advantages of holding on to money that effectively isn't theirs ? I doubt it very much.

Legislation is in place that allows businesses to claim statutory interest on overdues, but SMEs are generally too frightened to use it in case they aggravate their customers.

No-one is going to change business culture overnight, but SMEs can help improve their cash flow situations by taking direct action themselves.

Firstly, SMEs must ensure they state their payment terms on credit application forms and invoices.

They should always ask a customer whether they will need to quote a purchase order on any invoice submitted. Before any due date, but after delivery of the goods or services being invoiced for, make sure the client is happy with what they received. This phone call will eliminate the possibility of the client using the stalling tactic of blaming non-payment of an invoice on a product/service quality issue.

There are hundreds of tips one can give to SMEs. Perhaps readers of this blog can add a few more to my short list

AT AN Institute of Credit Management think tank meeting this week, it was clear that members representing insolvency practitioners, credit insurers and grass roots credit management are still scratching their heads over the relatively low insolvency numbers.

Historically, when the UK has pulled itself out of a recession, insolvencies have tended to rise.

During this particular credit crisis, insolvency stats were surprisingly suppressed, and in its aftermath, figures have continued to fall.

The mood among credit industry professionals seems to be one of cautious pessimism. Many still think that the number of business casualties will increase at some point, but I'm not too sure about this.

Due to a number of contributing factors, such as low interest rates, HMRC's Time to Pay scheme, and worries about the economy holding back many businesses' expansion plans, thus reducing the risk of over trading, maybe insolvency stats will remain muted.

If my last point is true, it may be good from a narrow insolvency stats perspective, but it won't do much to help drive an economic recovery of any note.

VINCE CABLE'S PROPOSALS to raise audit thresholds and abolish statutory accounts filing for microbusinesses have certainly provoked plenty of reaction. Philip King, CEO of the Institute of Credit Management, went so far as saying they displayed "naivity verging on madness"!

I've got to say I support the government wholeheartedly in its attempt to reduce so called red tape from the lives of small business owners and directors, but as I've said before in my Risky Business blog, helping SMEs cut back on management time spent on financial disciplines and controls doesn't seem sensible or desirable to me.

For the last twenty years or so, I have been a board director of Graydon, a "medium sized company" that would be impacted by Cable's recent proposals. Personally, I very much appreciated the work done by my finance dept in producing comprehensive management accounts each month and credible audited accounts at year end.

Undoubtedly, this work helped the board run an efficient and profitable business.
Being honest, what began to really frustrate me as a director was the growing administrative burden in the areas of compliance and HR regulation. Sometimes, it almost felt you were trying run a business with one arm tied behind your back.

I therefore welcome the news that the upcoming budget may try to address SME concerns related to maternity leave, employees' rights to take leave for training, and flexible working hours for employees with children up to the age of seventeen; legislation that has made the lives of business owners much more onerous. There's got to be a better balance!

In other words, I'm all in favour of cutting red tape to help SMEs - but please, let's cut the right kind of red tape !!!