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Calls for effective enforcement as government attempts to tackle late payments

by Jennie Ward

Changes to Prompt Payment Code (PPC) include requiring signatories from the “highest level of the company” to take responsibility and ensure “95% of invoices from small businesses are paid within in 30 days”, but calls remain for effective enforcement of the Code.

In an attempt to crack down on delayed invoices owed to small businesses, the government has announced an overhaul of the Prompt Payment Code.

The announcement states that under the new reforms, companies signed up to the Prompt Payment Code (PPC) will be obliged to pay small businesses within 30 days – half the time outlined in the current Code.

The scale of the problem and the reasoning behind the changes is outlined in the announcement, where it is stated: “Despite almost 3,000 companies signing the Code, poor payment practices are still rife, with many payments delayed well beyond the current 60-day target required for 95% of invoices. Currently, £23.4 billion worth of late invoices are owed to firms across Britain, impacting on businesses’ cash flow and ultimate survival.”

It continues: “To help tackle the problem, businesses owners, Finance Directors or CEOs will be required to take personal responsibility by signing the Code, acknowledge that suppliers can charge interest on late invoices under the Code and that breaches will be investigated. Those signed up to the Code will redouble their efforts to ensure payments are made on time and breaches will continue to be publicised by the government in order to encourage compliance.”

The move is said to be an attempt to “strengthen the powers of the Small Business Commissioner” with regards to ensuring larger companies pay smaller partners on time, and proposed new powers include “legally binding payment orders, launching investigations and levying fines.”

The changes coming into effect immediately are:

  • Requiring a company’s CEO or Finance Director, or the business owner where it is a small business, to personally sign the Code to ensure responsibility for payment practices is taken at the highest level of an organisation
  • Introducing a new logo for signatories to use in external communications to show their commitment to the Code, making it more damaging to a company’s reputation to breach it
  • Acknowledgement as a condition of signing the Code that suppliers can charge interest on late invoices
  • Enabling administrators of the Code to investigate breaches based on third-party information

In addition, the new requirement for signatories to pay 95% of invoices from small businesses (those with less than 50 employees) within 30 days will be effective from 1 July 2021. The target for larger businesses will remain 95% of invoices within 60 days.

James Talman, NFRC Chief Executive.

Whilst welcoming the announcement, it is this idea of effectively enforcing the PPC that James Talman, Chief Executive of the National Federation of Roofing Contractors, says is crucial. He explained: “The requirement for signatories of the Prompt Payment Code to pay 95 per cent of invoices from small businesses within 30 days is extremely welcome. The Covid-19 pandemic has slowed down payment to specialist contractors even further with one of our members waiting up to four months for payment from one client last year. It is now essential that the Prompt Payment Code is effectively enforced, so that today’s announcement proves to be more than just good intentions.”

Click here to view the full announcement.

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