Ken Lewandowski: 30-day rule would keep vital cash flowing SCOTTISH businesses continue to face numerous challenges on a daily basis as they fight to survive the economic downturn. With an economy driven by SMEs, it is these same organisations that often face the greatest strains, and indeed the most pressing issue they are currently confronted with is the need to get paid on time. In today's economic climate, we need to accelerate our exit from recession and create the platform and environment for our businesses to grow. It is imperative that we make some radical decisions and introduce legislation to generate a culture in which everyone pays their bills in 30 days, thereby allowing a steady flow of cash across industry, as well as encouraging and supporting growth. However, delayed payments across the supply chain are having an adverse effect on our SMEs with many having to wait 90 days or more to receive funds from larger organisations that, in effect, are leaning against their smaller counterparts. In the most severe cases this is forcing what would be considered healthy businesses to the wall because of lack of money coming in against the order book, resulting in job losses and administrations which could easily have been avoided. The popular perception may endure that it is the fault of the banks when businesses fail, for refusing to provide capital funds or extend overdrafts. However, in many instances, this simply isn't the case. Banks will always support small business but they can only do so much and for so long before they themselves become exposed. The real issue is the need for prompt and steady supplier payment. It can be a brutally thin margin between success and failure in business, with companies, particularly SMEs - which comprise around 99 per cent of Scottish businesses - having to negotiate a host of daily pitfalls as it is. Imagine then the sense of injustice felt by an efficiently managed business that's forced to fold because it's carrying too much debt caused by late payment. This is without doubt one of the biggest problems facing businesses today and it needs to be addressed. If there was a legal requirement for 30-day payment, everyone would benefit. It would prove punitive to no one. Businesses would have cashflow certainty and the resulting confidence to plan and develop, while bank finance earmarked for SMEs would be freed up for investment in larger scale projects. This positive trajectory would also encourage increased recruitment. And it's a proposal gathering serious momentum, with heavyweight business groups across Scotland, such as the Institute of Directors, CBI, Scottish Chambers of Commerce, Scottish Engineering, FSB and Scottish Building Federation, all recognising the problem and lending their support for the requirement of legislation to help eradicate this ongoing predicament. Together we would welcome Scottish Government's involvement in the issue to turn the current awareness into a positive outcome. On a UK level only last week, Business Minister Mark Prisk announced a new working group of business representatives that will examine issues behind late payment and, on a similar theme, a new guide for small businesses was launched by the Association of Chartered Certified Accountants. Although these are all good measures and definitely a move in the right direction, the problem still remains with the larger organisations delaying payments, which cannot be changed by any guidebook. The UK government's attempts to demonstrate best practice by settling 80 per cent of invoices within five days is very encouraging and it would be good to see this replicated in Scotland too. However, in order to make this truly work and be adopted across the board - not just in the public sector - the various professional bodies need to collaborate with Scottish Government and get behind the need to put this into practice through legislation. SMEs are the cornerstone of Scotland's economy. It's paramount we nurture and develop them for our wider, future prosperity. Steady cashflow in such businesses breeds confidence which in turn brings additional employment and prosperity. The introduction of a legal requirement for 30-day payment terms will help make this happen. As any business will tell you, profits are great, but cash is king. Whether the nation is in favour of independence or not in 2014, surely we want to be a profitable country at that point and not one that is facing bankruptcy?  Ken Lewandowski is a fellow of the Institute of Directors, Scotland and the chair of several SMEs