Government tackles late payment to small businesses to protect jobs

By rotide
Created 18/01/2021 - 18:30
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An overhaul of the Prompt Payment Code to crack down on delayed invoices owed to small businesses has been announced by the government today.

Under new reforms, companies that have signed up to the Prompt Payment Code (PPC) will be obliged to pay small businesses within 30 days - half the time outlined in the current Code.

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. 

To help tackle the problem, businesses owners, Finance Directors or CEOs will be required to take personal responsibility by signing the Code, acknowledge that suppliers can charge interest on late invoices under the Code and that breaches will be investigated. Those signed up to the Code will redouble their efforts to ensure payments are made on time and breaches will continue to be publicised by the government in order to encourage compliance.

The move comes as the government seeks 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. 

from  [1]1 July 2021 [2]. The target for larger businesses will remain 95% of invoices within 60 days. 

Interim Small Business Commissioner Philip King said:

"I am delighted to launch the reformed Prompt Payment Code. In addition to their current public commitment to pay 95% of all payments to their supply chain within 60 days, signatories of the reformed Code have committed to paying 95% of their small business suppliers within 30 days. I commend those signatories who make further individual commitments to go further and settle invoices sooner.

"Late payment causes real hardship to small businesses, and the issue is more prevalent than ever due to the continued impact of the pandemic. Code signatories of all sizes demonstrate their commitment to ending the culture of late payment and helping to increase business confidence. I encourage businesses of all sizes to implement ethical business practices and sign up to become a Code signatory and join us on our journey to aid business recovery post COVID-19".

FSB National Chairman Mike Cherry said:

"A late payment crisis was massively stifling the UK economy before Covid hit. The pandemic has deepened it. FSB has campaigned for good payment practice to become the norm across the UK economy, not least through a toughening of the Prompt Payment Code and the adoption of 30 days as the new maximum payment period.  

"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 Confederation of British Industry's chief UK policy director Matthew Fell said: 

"COVID-19 has once again highlighted the importance of maintaining healthy supply chains. 

"Small companies are the backbone of the economy, but remain the most at risk from a late or unpaid invoice - particularly after months of pressure on cashflow. 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."

The PPC currently has over 2,800 signatories, who are required to pay 95% of their invoices within 60 days or else be publicly struck off the Code until substantial changes to their payment practices have been made.  

When a company is struck off the Code for poor practice, this is publicly announced by the Small Business Commissioner's Office. A record of signatories and struck-off companies is maintained on the Prompt Payment Code [3] and SBC websites. 

The changes to the Code sit alongside a consultation on the powers of the Small Business Commissioner

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