Jane Embury welcomes a new government Code.
One of the main problems facing any business is being paid on time.
No matter what contractual arrangements are agreed from the outset, in many cases invoices are paid late, well after the work has been completed.
For bigger companies with larger cash reserves, that’s not so much of a problem. But for smaller companies it can mean the difference between life and death.
It’s why we welcome the news that signatories to the government’s Prompt Payment Code (PPC) will now have 30 days to pay small businesses.
Because it’s part of new reforms to crack down on delayed invoices, and keep companies afloat.
That’s of real importance with much of the economy shut down.
The original target of 60 days to pay small firms has been cut to 30 days,
It means that chief executives or finance directors of companies signed up to the PPC will be making a personal commitment to the new targets.
In practice, they will be agreeing that suppliers can charge interest on late invoices.
Signatories will have to pay 95% of invoices from businesses with less than 50 employees within 30 days. It becomes effective from 1 July 2021.
However, the target for larger businesses will remain 95% of invoices within 60 days.
The government has pledged to investigate breaches of the code. Importantly, confirmed breaches will be made public.
It will therefore give confidence to small businesses that they will be treated fairly.
A new logo has been created for signatories to use, demonstrating their commitment to the code.
That in itself is a powerful marketing tool, showing corporate responsibility to the small contractors and suppliers they rely on.
Some 3,000 companies are already signed up to the PPC. However, the government recognises that poor payment practices are still endemic in the construction industry, with the 60 day target not being met in many cases.
It’s part of a wider plan to bolster the powers of the Small Business Commissioner (SBC) to ensure larger companies pay their smaller partners on time.
The government recognises that late payment causes real hardship to small businesses, and the issue is more prevalent than ever due to the continued impact of the pandemic.
It’s hoped that code signatories will be demonstrating their commitment to ending the culture of late payment and helping to increase business confidence.
As a small company trading internationally, we welcome that commitment. We also hope that the culture of late payment becomes a thing of the past.
That’s something to hope for in 2021!