The so-called late payment culture is still a very real problem, especially for SMEs who can face serious cash flow problems if payments do not arrive on time.
The government is keen to turn the UK’s late payment culture into a ‘responsible payment culture’ and is seeking the views and experiences of businesses on the impact of unfair payment practices.
The Prompt Payment Code, which is administered by the Chartered institute of Credit Management on behalf of BEIS, sets standards for payment practices and best practice.
Those signing up to the code agree to:
• Pay suppliers on time within the terms agreed at the outset of the contract.
• Give clear guidance to suppliers on payment procedures, advising them promptly if there is any reason why an invoice cannot be paid to the agreed terms.
• Encourage good practice by asking lead suppliers to adopt the code throughout their own supply chains.
• Pay suppliers within a maximum of 60 days (in line with late payment legislation requirements) and to work towards adopting 30 days as the norm.
The Prompt Payment Code is, however, voluntary and according to the Federation of Small Businesses is not working when signatories, like Carillion, pay on terms of over 120 days.
Business Secretary Greg Clark is keen to strengthen the code and in December 2017 created the role of Small Business Commissioner, which is currently performed by Paul Uppal, to resolve payment disputes and tackle larger businesses’ unfair payment practices.
To support him in this task, the Small Business Commissioner will be joining the Prompt Payment Code’s Compliance Board, which considers complaints about compliance at regular reviews.
The government has also committed to setting a positive example by promising to make sure that 90% of its non-disputed invoices for SMEs are settled within five days.
These are undoubtedly baby steps in the right direction, however, much more needs to be done to change the late payment culture.
You have until 29 November 2018 to respond to the government’s call for evidence on creating a responsible payment culture.
If unpaid invoices are affecting your business and you need help to recover money that you are owned, contact our Head of Debt Recovery Richard Anderson by emailing email@example.com or calling 01782 205000.