Money makes the world go round, so the saying goes. When it comes to business however, it’s payments that keep things moving.

Effortless – and crucially timely – payments are the oil in the machine of the SME economy. Given this, late payments are not only a huge inconvenience, they can also be costly. In fact, the Small Business Commissioner estimates that late payments cost the economy around £11bn every year. For SMEs already struggling with a challenging economy and rising tax bill, this is something that can be ill-afforded.

It’s for this reason the Government has introduced the Commercial Payments Bill, which recently reached report stage in the House of Lords and could soon be on the statute books. The Bill imposes 60 day payment limit obligations on businesses for the first time, with penalties for non-compliance imposed by the Small Business Commissioner.

In every direction

This is undoubtedly positive news for the many SME owners out there who lose money to late payments and spend valuable hours chasing invoices instead of building their businesses. The rules apply equally to those same SMEs however and the sudden pressure to get payments made on time or face action could add pressure to payment teams and often creaking payment infrastructure.

And when it comes to late payments, it’s not always the result of shoddy admin.

What if your business too is waiting on late payments and doesn’t have the funds to pay those further down the line? Payments are often as much about cashflow as anything else and cashflow as any business knows, is often subject to disruption.

Or what if some unexpected event throws business off course? A flood, strike, weather event – who knows. If the last decade has taught us anything, it’s that the unexpected can actually happen.

None of this is to excuse late payers, but rather to show that there can be mitigating circumstances. Hopefully by keeping everyone focused on paying on time, the Commercial Payments Bill will go some way towards alleviating these issues, and keeping some of the lost £11bn in the SME economy.

Keeping Track

So, how can SME owners keep track of payments and avoid the penalties outlined in the Bill for late payment?

For many businesses, working with potentially hundreds of payees with scheduled payments dropping at different times, isn’t as simple a task as it may at first seem.

One thing I know from working with multiple HR teams amongst Britain’s SMEs is that, as employee payments become more complex, old-fashioned or dare I say legacy payment systems like BACS, are no longer going to cut it. That’s not to say these systems should be abandoned entirely. It could be that they still serve a purpose and that they are deeply entwined with existing processes and practices across a business.

More and more however, to ensure the flexibility needed to keep the payments flowing, these systems need to be supplemented with paytech. So, what does this look like in practice?

For a start, paytech means payments are in one place. Instead of swiping between bank portals, spreadsheets and emails every payment – and crucially every payment deadline – is accessible and clear. This means alerts can be set, further reducing the chances of a breach, no matter how complex a set of payees an SME owner might be managing. Paytech also brings a degree of speed and flexibility which many SMEs currently lack. This means payments can be made when needed, on the same day or even instantly. This is especially helpful if your own payments arrive late, leaving you limited time to pay your payees.

For finance teams too, a clearer dashboard view of payments and payment schedules makes it easier to work with cashflow, even if the unexpected hits. The automating of routine scheduling and reconciliation tasks also frees up time to manage the tricky payments and the tricky months.

Late payments are at best an inconvenience, at worst they can be a significant business risk. The Commercial Payments Bill aims to tackle this risk and raises the bar for everyone. This is good news for SME owners waiting on payments, but also raises the bar when it comes to paying others.

The risk now is the reputational and regulatory risk of breaching the terms of the Bill. Thankfully a growing suite of paytech products designed around the needs of SMEs, means this risk can also be mitigated.