Small business minister Margot James has reiterated her support for measures that will encourage better payment practices towards small firms, in a letter to signatories of the Prompt Payment Code (PPC).
Writing to some 1,800 UK businesses, James, along with the letter’s co-author – chief executive of the Chartered Institute of Credit Management (CICM) Philip King – reminded PPC signatories of their commitment to paying suppliers, most of which are small firms, within 30 days.
Highlighting the success of the code to date, the letter acknowledged some of the challenges faced by its signatories, which it said had been “hugely successful in achieving fast settlement of invoices, creating dialogue between parties, improving contract terms, and providing constructive assistance welcomed by suppliers”.
Administered by the CICM on behalf of the Department for Business, Energy and Industrial Strategy (BEIS), the PPC is one of a series of measures tackling late payments introduced by the government as part of its Small Business, Enterprise and Employment Act 2015.
The letter urged the code’s signatories to increasingly make 30-day payment terms to UK suppliers the norm, and that although 30-day terms would not be actively enforced by the PCC’s compliance board, paying invoices within 60 days may become a requirement unless “exceptional circumstances” were accepted on a case-by-case basis – for example if a business owner could demonstrate that different payment terms would be beneficial to their smaller supplier.
In the letter, James said: “Prompt payment can make all the difference to small business owners, boosting their cashflow and allowing them to invest in growth for the future.
“Although we have seen some progress, there are still too many business owners across the country who have not been paid on time by their customers.”
In 2016, Britain’s smallest firms were found to be hit more disproportionally by late payments than ever before. According to the latest statistics from the Asset Based Finance Association (ABFA), micro firms now wait up to six weeks longer than big companies for invoices to be paid. Indeed, the average waiting time for payment by UK businesses with less than £1m turnover jumped to 71 days this year, while firms with a turnover of more than £500m waited only 38 days.
James added: “We need a culture change to stamp this out and the Prompt Payment Code continues to play an important role in bringing this about, alongside a package of measures taken forward by government. The businesses signed up to the Code commit to demonstrating the gold standard of payment practices.”
Also re-confirmed in the letter was the government’s commitment to appoint a small business commissioner – a role designed specifically to tackle late payment culture – and the introduction of the statutory duty for larger businesses to report on industry payment practices, due to come into force in April 2017.
Read more about measures in the Enterprise Act and how it could impact small businesses.
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