Posted: Thu 1st Jul 2021
From today, big companies signed up to the Prompt Payment Code are obliged to pay 95% of invoices to small businesses within 30 days, half the time of the previous 60 days.
The code is a voluntary scheme through which large businesses commit to paying their small suppliers on time. The new rules apply to small firms with under 50 staff.
Other changes introduced in January mean finance directors or chief executives must take personal responsibility for signing the code, acknowledging that suppliers can charge interest on late invoices and that breaches will be investigated.
Almost 3,000 companies have signed the code but the government says "poor payment practices are still rife" with many payments delayed well beyond the previous 60-day target for 95% of invoices.
A total of £23.4bn in late invoices are owed to companies across Britain and in a recent report by Intrum on the impact of the coronavirus pandemic on prompt payments, 50% of UK businesses said they had accepted longer payment terms than they are comfortable with, as they did not want to damage client relationships.
Signatories which breach the terms of the Prompt Payment Code can be investigated by the Small Business Commissioner, who is appointed by the government to help small businesses tackle late payments. They can be removed from the code and publicly named as a business with poor payment practices.
Former BBC journalist Liz Barclay began her role as the Small Business Commissioner today. "The supply chains depend on prompt payments so each link in the chain can keep on producing their vital goods and services and the firms contracting with them have goods to sell," she said.
"The economy depends on small businesses to take risks, innovate and create jobs which they can’t do without being paid promptly. The big firms need the smaller ones all along the supply chain to innovate, provide skills and experience and boost their bottom line."
What do you think of the new measures? Will they make a difference? What are your experiences of late payment? Email Dan with your thoughts and experiences.