Prompt Payment Code to accelerate payments to small businesses

Before the changes, big businesses had up to 60 days to pay their smaller suppliers. The UK Government has sought to strengthen the PPC given the fact that issues regarding unpaid and overdue invoices are “rife” across the country.

It’s said that up to £23.4 billion is owed by larger companies to smaller firms, with this figure rising further still as a consequence of the COVID-19 pandemic.

The Federation of Small Businesses (FSB) has estimated as many as 50,000 small firms close for good each year due to overdue invoices, impacting heavily on the UK’s jobs market and wider economy.

Mike Cherry, National Chairman, FSB, said: “Ending our pernicious poor payment culture for good over the coming months will be fundamental to turning our hopes of economic recovery into reality.”

Currently, some 2,800 signatories have signed up to the voluntary PPC, with these large businesses committing to paying at least 95% of their invoices from small suppliers within 60 days, or face being publicly removed from the list until their payment practices are improved.

The revised PPC will require those signatories with invoices from firms with less than 50 employees to pay them within 30 days. The 60-day window will remain in place for larger companies with outstanding invoices from similar-sized businesses.

In addition, any large company wishing to sign up to the PPC will require their chief executive or finance director to personally sign their name to the code. This is designed to demonstrate that responsible payment practices are taken seriously at the highest levels of a business.

Interim Small Business Commissioner, Philip King, 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.”

Crucially, the updated PPC will also empower small suppliers to charge interest on overdue invoices and give them the right to appoint administrators to investigate breaches of the code via third-party sources.

Small Business Minister, Paul Scully, believes tightening the PPC is essential to aid the country’s economic recovery, in particular the UK’s army of small businesses.

“Our incredible small businesses will be vital to our recovery from the coronavirus pandemic, supporting millions of livelihoods across the UK,” said Scully.

Without a sustainable cashflow, no business can survive long-term. Whether you are a small business owner or a sole trader, if you find yourself taking time out of your busy schedule to chase late payments from customers, we can recommend a host of debt collection services that specialise in efficient, cost-effective debt recovery.

Using skilled, professional mediation, these services can also maintain valuable working relationships, whilst recovering the money you are rightfully owed.

For a free initial consultation on our debt recovery partners, give our friendly and experienced team a call today on 020 4502 9677 or drop us a line using our online enquiry form.

We’re also happy to offer advice via video meeting, allowing you to accelerate any overdue invoices from the comfort of your own home.

Date published 21 Jan 2021