Prompt Payment code strengthened for government suppliers

In a bid to help the cash flow of small businesses, and reduce the number of outstanding payments across the country, some of the biggest suppliers to the UK government have committed to paying more invoices on time. Prior to the 2017 general election, the Conservative Manifesto made a clear promise to back the Prompt Payment Code, and work towards improving the general business environment, particularly for SMEs. “We will use our buying power to ensure that big contractors comply with the Prompt Payment Code both on government contracts and in their work with others. If they do not do so, they will lose the right to bid for government contracts,” the manifesto stated.

Get payments on time

According to the Chartered Institute of Credit Management (CICM), it’s estimated that small and medium-sized enterprises in the UK are collectively owed more than £26 billion in overdue payments. So far, 32 of the UK government’s biggest suppliers have voluntarily committed to pay 95 per cent of invoices within 60 days – and to work towards adopting 30 days as the norm. These signatories represent strategic suppliers who usually have government contracts valued at £100 million or more – and they account for around 40 per cent of the government’s procurement spend.

Caroline Nokes, parliamentary under secretary of state in the cabinet office, called the move a “major boost” to how payments are dealt with in the UK. “Paying invoices on time is vital in providing healthy cash flow to smaller businesses, to help them survive and thrive,” she said.
Small business minister, Margot James, agreed. “We want the UK to be the best place in the world to start and grow a business,” she said. However, unfair payment practices have made it difficult for businesses – especially those just starting out – to invest in growth. “[They] have no place in an economy that works for everyone,” she said.

The Crown Commercial Service (CCS) is encouraging businesses to sign up to the code, which is administered by the CICM on behalf of the Department for Business, Energy & Industrial Strategy (BEIS). The code is voluntary, and it publicly signifies an organisation’s commitment to fair payment terms to suppliers. Philip King, chief executive of the CICM, highlighted the importance of government suppliers leading by example by signing up to the Prompt Payment Code. “The PPC allows suppliers to raise a challenge if they feel they are not being treated fairly by a signatory, and such challenges are proving successful not only in delivering payment but also in further improving practices and processes,” he said. “It’s vital that businesses feel confident and have certainty that they will be paid on time, as well as having a route to challenge if they need to.”

While this is a great step towards reducing the problem of late payments, credit management teams will still need to chase up late invoices and here at OnGuard, we offer software and solutions to help you streamline that process. To find out more, contact us today.


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