Partner Article

Prompt Payment Code helps crackdown on late payments?

Businesses across the country are sharing their views in a consultation survey regarding new processes to strengthen the Prompt Payment Code in an attempt to finally stop late payments.

Late payments are a serious issue for businesses of all sizes, but for SMEs it can be really detrimental to their cash flow and can create a challenging relationship with suppliers. According to research by the Institute of Directors, 66% of SMEs have had issues receiving invoices on time, causing detrimental knock-on effects to other areas of their business.

For some small businesses, paying for goods and services is a constant struggle, as they often lack funds owed to them by other providers further up the supply chain. One late payment can trickle down and seriously affect all areas of the supply chain. Restrictions to their cash flow mean they cannot pay for the vital components of their business until they receive vital payments, which slows down processes, with 13% of SMEs claiming that they were unable to grow their business and 10% suggesting they had to reorganise their financial arrangements.

Encouraging good practice

Administered by the Institute of Credit Management on behalf of the Department for Business, Innovation and Skills, the Prompt Payment Code aims to drive change by encouraging suppliers to pay each other on time.

Not only this, the code provides suppliers with clear guidelines on payment procedures, including advising companies promptly if, and why, an invoice is not going to be paid to the agreed terms. It also highlights the system for dealing with complaints and disputes, should suppliers need to go down this route, so that businesses can feel confident that any issues will be handled in a professional manner.

Signatories of the code will continue good practice by requesting that lead suppliers encourage adoption of the code throughout their own supply chain, which means businesses can build stronger relationships with suppliers and customers alike, safe in the knowledge that they will deliver services on time.

Consultation for changes

The government has launched a month-long consultation in the form of a questionnaire to seek views from businesses regarding amendments to the code, including the monitoring and enforcement of the policy, improving information on the code’s website and funding the code for the future.

Other potential movements may involve the introduction of a maximum payment term for signatories that sign up, and the establishment of a board who have the power to remove signatories from the code.

Currently, only large-scale companies have a duty to report information on their payment practices and performance. However, the government’s survey seeks the views of smaller organisations. A wide range of suppliers will be selected by the Prompt Payment Code administrators at random to ensure a non-biased sample is examined.

Once approved, businesses can use the PPC logo on their website and in documentation, illustrating that they are serious about their good payment practice, building greater trust with suppliers. If you are a small business looking for ways to make yourself more competitive or to simply boost your levels of consumer confidence, the PPC code is really worth looking into.

This was posted in Bdaily's Members' News section by Susie Francis .