More top companies commit to paying small businesses on time
More than 30 of the government’s biggest suppliers have voluntarily committed to pay 95% of invoices within 60 days - and to work towards adopting 30 days as the norm.
The commitments are part of the Prompt Payment Code (PPC) initiative, which aims to ensure that small businesses are paid on time.
The PPC sets standards for payment practices and is administered by the Chartered Institute of Credit Management. Compliance with the principles of the code is monitored and enforced by the Prompt Payment Code Compliance Board. The code covers prompt payment, as well as wider payment procedures. These include paying suppliers:
- within the terms agreed at the outset of the contract
- without attempting to change payment terms retrospectively
- without changing practice on length of payment for smaller companies on unreasonable grounds.
It also encourages good practice by requesting that lead suppliers encourage adoption of the code throughout their own supply chains.
The new signatories to the code are major strategic suppliers who typically have contracts across government of more than £100m. Together they account for around 40% of government procurement spend.
The continued support for the PPC is welcome but many small businesses still struggle to get invoices paid on time.
It’s estimated that small and medium-sized enterprises in the UK are collectively owed more than £26 billion in overdue payments.
This can cause cash flow problems that prevent small firms functioning effectively and even put some out of business.
Businesses need to ensure they monitor overdue invoices and take early action to ensure prompt payment. Failure to do so could lead to cash flow problems and severe financial difficulties.
Please contact Neil O’Callaghan if you would like more information about the issues raised in this article or any aspect of credit control and debt collection.