Small firms to make a pact on late payment » SMEInsider

Small firms to make a pact on late payment

A businessman who suffered at the hands of late-paying clients has set up a scheme to help other SMEs to tackle the problem.

Chris Hawthorn launched the PACT (Please Abide Contract Terms) scheme after the property marketing business he set up in 2005 failed in the wake of the accumulative burden of bills going unpaid.

The scheme enables small businesses to sign up to a set of pre-agreed procedures to help them to recover debts, while maintaining good relationships with suppliers.


Repercussions for late payers

Members of the scheme will be able to access mediation in the first instance, with credit reference agencies on board to impose credit score penalties for those that continually refuse to pay on time.

As a last resort, serial offenders that ignore reminders will be listed on, which shares the company’s name, web address, the debt amount and due date.

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. Ultimately, this resulted in the business failing.


Leading the fight

“Unsurprisingly, 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.”

Individual late payments owed to small firms may be small, but they can add up and become an overwhelming pressure. The average late payment burden shouldered by SMEs now stands at £31,901.

The total owed to UK businesses by late-paying clients has reached £41 billion, with surveys showing that 60 per cent of firms have been adversely impacted by the problem.

It is estimated that small business owners spend up to an extra £677 per month on overheads in chasing late payments.