Giant corporations should pay small enterprise suppliers inside 30 days
Large companies have to pay 95 percent of small business supplier invoices within 30 days of July 1, cutting the late payment window in half.
The government has cracked down on large companies that are taking too long to pay bills to solve cash flow problems for thousands of smaller businesses.
Despite nearly 3,000 companies signing the Prompt Payment Code, there are still poor payment methods out there. Many payments are delayed well beyond the current 60-day target of 95 percent of invoices.
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Currently, businesses across the UK are owed £ 23.4 billion in late invoices, which is impacting cash flow and the ultimate survival of businesses.
Company directors, officers, and finance directors must personally sign the Code to ensure that responsibility for payment practices is assumed at the highest level of an organization.
The bosses must also recognize that suppliers can charge interest on late invoices, and the code monitored by the office of the small business commissioner on behalf of the business department has made it possible to investigate violations based on information from third parties.
Kwasi Kwarteng, the business secretary, told The Times that the "basic principle" of paying for goods or services on time is not always respected by larger companies. This is bad for business, bad for work, and bad for the well being of hardworking business owners and their families at a time when they need all the help they can get. "
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The government is also considering giving its Small Business Commissioner stricter powers, who can mediate in corporate payment disputes. In the past, the voluntary payment code has been criticized for failing to sanction signatories who are guilty of poor treatment of suppliers.
Mr Kwarteng added that the Small Business Commissioner would "be empowered to issue legally binding payment orders, investigate and, if necessary, impose fines."
Businesses are publicly named and shamed for breaking the instant payment code. Retailer Holland & Barrett is the first major company named for late payment from suppliers in 2019.
Construction companies such as Balfour Beatty, Costain, Engie, Interserve and Laing O'Rourke were also advised that they failed to pay 95 percent of their bills within 60 days this year.
More recently, a tougher line has been taken with the signatories. BAE Systems, Shell, BT, Prudential and a subsidiary of Associated British Foods, the owner of Primark, are said to have been "named and shamed" for allegedly poor payment practices.
The stricter terms could cause some companies to abandon the code, but proponents said it was better to have a working system with fewer signers than a larger one that did little to promote best practice.
Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said that "finally ending our damaging bad payments culture in the months ahead will be fundamental to turning our hopes for economic recovery into reality".
The Institute of Directors has warned that the coronavirus pandemic has exacerbated the late payment problem for UK businesses.
Small Business Secretary Paul Scully said: “Today we are relieving small business owners by fundamentally reforming the UK payment regime and pushing big companies to pay their suppliers on time.
"By signing the Instant Pay Code and following its rules, large businesses can help the UK rebuild better and protect the jobs, innovation and growth that are driving small businesses across the UK."
According to the FSB, around 50,000 businesses close each year due to late payments, which harms Britain's prosperity and threatens jobs.
The voluntary Prompt Payment Code continues to insist that large companies only have 60 days to pay larger business suppliers with more than 50 employees.
A quarter of a million small businesses will collapse without further help from Covid