An overhaul of the Prompt Payment Code (PPC) to crack down on delayed invoices owed to small businesses was announced by the Government on 19 January. Under new reforms, companies that have signed up to the 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, acknowledging that suppliers can charge interest on late invoices under the Code and that breaches will be investigated.
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.
Small Business Minister Paul Scully (pictured) said: “Our small businesses will be vital to our recovery from the Coronavirus pandemic, supporting millions of livelihoods across the UK. Today, 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.”
According to the Federation of Small Businesses
(FSB), around 50,000 businesses close every year due to late payments, damaging Britain’s prosperity and threatening jobs. The reforms will help to build a culture of prompt payment between companies and challenge UK businesses to change their practices and stand by small partners at a critical time for the UK’s economic recovery.
Philip King, the Interim Small Business Commissioner, said: “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.”