Ban on Anti-Invoice Finance Terms in Work Contracts
From next year (2016) small and micro-businesses across the country will have a new option for growing their business and improving their cash flow thanks to a decision by The Department for Business, Innovations, and Skills (BIS) to allow small business owners the right to secure finance against money owed to them through invoices for all working contracts.
This decision was made possible due to a ban on anti-invoice finance terms, with the ban being seen as a direct method of speeding up economic growth and, as a result, helping to create jobs.
Invoice finance is particularly beneficial for small and micro-businesses because it give them the option to receive the income that’s owed to them sooner, thus avoiding falling into negative cash flow. Speaking on the ban, Small Business Minister Anna Soubry said “While invoice finance may not be right for everyone and is absolutely no excuse for late payment, I want small businesses to have the option of using it to increase their cashflow. This is all part of our plan to maintain the UK’s position as the best place in Europe to start and grow a business.”
What is Invoice Finance?
Invoice finance is a option that allows small and micro-business owners to receive finance for invoices that contain money (often late payments) owed to the business. The Asset Based Finance Association (ABFA) estimate that over 44,000 businesses in the UK receive over £19 billion of invoice finance in this manner at any given time.
Invoice finance allows small and micro-businesses to receive the majority of the money owed to them much faster (often within a standard thirty-day invoicing cycle) than if they simply waited for their customers to pay their invoice.
Regular, positive cash flow is the lifeblood of small business, which is why invoice finance has become increasingly popular among small and micro-businesses in recent years, with the ban on anti-invoice finance terms likely to increase this. Despite this excellent new change, it would still be advised to keep up to date with the best practices on How to Minimise Late Payments.
The Changes
In the past clauses within working contracts looking to prevent sub-contracting would often (and sometimes inadvertently) make it impossible for invoice finance to take place on said contract.
The ban on anti-invoice finance terms in contracts, which was made possible by terms set out in this year’s Small Business, Enterprise and Employment Act, received cross-party support in Parliament, with almost-identical bans in Australia, Canada, and the United States said to confirm its necessity.
Speaking of the importance of small businesses, Small Business Minister Anna Soubry said: “Small businesses are the economic backbone of Britain and we will do everything possible to make sure they continue to grow and create jobs. By scrapping restrictions on invoice finance, thousands of firms across the country could benefit from faster access to hard-fought funds.”
The Federation of Small Businesses was also complimentary of the ban, with National Chairman John Allan stating that “The decision to outlaw the ban on terms in contracts to prevent businesses from choosing who they want to go to for invoice financing is overwhelmingly positive for businesses around the country.”
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Experienced Accountants
If you’re looking to start applying for invoice finance, or you just want to know how to go about applying when the time comes, your accountant can work with you to simplify this process.
To speak with a professional accountant to discuss the new anti-invoice finance terms, or for anything else, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
