The UK Government has announced what is claims will be the toughest crackdown on late payments in over 25 years.
Sweeping new powers are to be given to the UK’s Small Business Commissioner to investigate poor payment practices, adjudicate payment disputes, and fine the worst offenders.
It could result fines worth tens of millions for firms that persistently pay late or fail to comply with the new laws.
Research published by the Department of Business and Trade (DBT) in London linked late payments to the closure of around 319 small and medium-sized enterprises (SMEs) every year in Northern Ireland.
The government said the changes will include a new 60-day cap on payment terms on all large firms when paying smaller suppliers.
New mandatory interest on late payments will also be introduced, with a requirement for all commercial contracts to include statutory interest set at 8% above the Bank of England base rate.
A compensation fee of £100 will also be applied to every overdue payment.
The issue of late payment has been consistently highlighted by the Federation of Small Businesses (FSB) in Northern Ireland, where there is a high proportion of micro-businesses particularly vulnerable to the impact of unpaid invoices.
The construction sector, a major employer in Northern Ireland, could also see specific changes.
The government is proposing a ban on the withholding of retention payments in construction contracts, with the aim of to preventing small firms from losing money due to insolvencies further up the supply chain.
FSB policy chair Tina McKenzie said: “Late payments are a blight on our economy, so FSB is pleased to have worked in partnership with the Government to deliver the toughest legislation in the G7.
“The new laws will finally bring a stop to big businesses using their small suppliers as sources of free credit.
“This is real progress, and we’ll keep working with the government to make sure new laws are brought in as soon as possible.”