An overhaul of the Prompt Payment Code (PPC) will “push” big businesses to pay their suppliers on time, it has been suggested.
Despite almost 3,000 companies signing the code, a recent study found that late payment practices are “still rife” across the nation.
Launched in 2008, the Prompt Payment Code requires signatories to pay suppliers within 60 days of receipt of goods and within the terms agreed at the outset of the contract.
However, a review of the rules found that poor payment practices continue to plague small businesses, with £23.4 billion worth of late invoices owed to suppliers in 2020.
Many signatories also failed to meet the 95 per cent target for paying invoices within 60 days, the study found.
To support businesses, the reforms will see the current 60-day target cut in half to 30 days. The overhaul will also see several changes come into effect from today. These include:
- 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
Commenting on the announcement, Small Business Minister Paul Scully said: “Today, we are relieving some of the pressure on small business owners by introducing significant reforms to the UK payments regime – pushing big businesses to pay their suppliers on time.
“By signing up to the Prompt Payment Code and sticking to its rules, large firms can help Britain to build back better, protecting the jobs, innovation and growth which small businesses drive right across the UK.”
According to the latest statistics, around 50,000 businesses are forced to close every year due to late payments.
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