With government research indicating that one third of payments to small businesses are late, we take a look at the latest initiatives designed to encourage prompt payment.
The Small Business Commissioner
The government estimates that 20% of small businesses in the UK have encountered cashflow issues as a direct result of late payments. Were small businesses to be paid on time, it is thought that around an extra £2.5 billion could be channelled into the UK economy annually.
In late 2017, the government launched its new Small Business Commissioner service, with the stated aim of helping the UK’s 5.7 million small businesses to get paid on time. The complaint handling service is managed by the new Small Business Commissioner, Paul Uppal, and seeks to resolve disputes relating to unfair payment practices and late payments. The Small Business Commissioner’s website offers guidance and advice to firms on payment issues, and suggests suitable courses of action to take in the event that a payment becomes overdue.
It also provides businesses with a tool to check whether the correct information has been supplied to the correct person in order for an invoice to be paid on time, or to chase when a payment is overdue. The website can be accessed here: www.smallbusinesscommissioner.gov.uk.
The Prompt Payment Code
The Chartered Institute of Credit Management’s Prompt Payment Code (PPC) outlines the minimum standards for payment practices, and requires its signatories to commit to paying their invoices within a maximum of 60 days, and work towards adopting 30 days as the norm.
Large businesses which sign up to the PPC must ensure that their suppliers are paid on time every time, and within the terms as set out in their contract, without attempting to change the payment terms retrospectively.
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Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.