Companies signed up to the Prompt Payment Code (PPC) now have just 30 days to pay their suppliers after the code was given a major overhaul.
As part of a crack down on delayed invoices owed to small businesses the Government has revamped its Prompt Payment Code, the pledge made by large companies to pay its suppliers on time.
As part of the reforms, those that have signed the PCC will be obliged to pay small businesses within 30 days - half the time outlined in the current code.
Almost 3,000 companies have already signed up to the code, but despite this the Government has admitted that poor payment practices are widespread and many payments still miss the 60-day target.
Currently, £23.4bon worth of late invoices are owed to firms across Britain, impacting on businesses’ cash flow and ultimate survival.
According to Mike Cherry, national chairman of the Federation of Small Businesses (FSB), the situation has got much worse during the coronavirus pandemic.
He said: “A late payment crisis was massively stifling the 海角视频 economy before Covid hit. The pandemic has deepened it. FSB has campaigned for good payment practice to become the norm across the 海角视频 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.”
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As part of the PPC overhaul business owners, finance directors and CEOs will now be required to take personal responsibility by signing the code. They will give their permission that suppliers can charge interest on late invoices and that breaches to the code will be investigated.
The Government is also attempting to strengthen the powers of the small business commissioner. New powers being considered include introducing legally binding payment orders, and allowing the commissioner to launch investigations and levy fines.
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.”
The changes have also been welcomed by the British Chambers of Commerce (BCC).
Suren Thiru, head of economics at the BCC, said: “With firms continuing to face major cash flow difficulties, and our research suggesting that late payments have risen during the pandemic, businesses will be encouraged by the launch of a reformed prompt payment code.
“The improved code must be the first step in creating a culture of prompt payment where affected firms feel confident to call out bad practices, government uses its convening power to tackle this issue in sectors where it is clear that problems exist, and where there is a clear focus on improving relationships between businesses to address the problem of late payment.”