Action on invoices
Directors to sign code in late payment crackdown
Mike Cherry: ‘progress’
Chief executives and finance directors will be required to take personal responsibility for ensuring prompt payment to small businesses.
By signing the Prompt Payment Code directors will acknowledge that suppliers can charge interest on late invoices.
The move is part of a new crackdown on late payment by the Department for Business, Energy and Industrial Strategy.
From July, companies that have signed up to the code will be obliged to pay small businesses within 30 days – half the current time allowed.
Despite almost 3,000 companies signing the Code, poor payment practices are still rife, with many payments delayed well beyond the current 60-day target required for 95% of invoices.
Currently, £23.4 billion worth of late invoices are owed to firms across Britain, impacting on businesses’ cash flow and ultimate survival.
The government is also seeking to strengthen the powers of the Small Business Commissioner (SBC) to ensure larger companies pay their smaller partners on time.
New powers proposed in a recently closed consultation include legally binding payment orders, launching investigations and levying fines.
Small Business Minister Paul Scully said: “We are relieving some of the pressure on small business owners by introducing significant reforms to the UK payments regime – pushing big businesses to pay their suppliers on time.
“By signing up to the Prompt Payment Code and sticking to its rules, large firms can help Britain to build back better, protecting the jobs, innovation and growth which small businesses drive right across the UK.”
When a company is struck off the Code for poor practice, this is publicly announced by the Small Business Commissioner’s Office.
According to the Federation of Small Businesses (FSB), around 50,000 businesses close every year due to late payments.
Mike Cherry, national chairman of the FSB, said: “It’s good to see the progress announced today by BEIS and especially the outgoing Small Business Commissioner that has driven this agenda.
“It’s now time for swift delivery, and for all existing and future PPC signatories to implement 30 days as the new maximum. Ending our pernicious poor payment culture for good over the coming months will be fundamental to turning our hopes of economic recovery into reality.”
The CBI’s chief UK policy director Matthew Fell said: “Businesses have been making good progress to improve payment practices, but more can be done.
“Introducing new rules to drive faster payments to smaller businesses will strengthen supply chains, benefiting the firms that need it most, and shortening the road to recovery.”