The government will aim to pay small firms within five days, as it launched a series of new proposals to tackle the problem of late payment to small businesses.
It said it would aim to pay 90% of undisputed invoices from small- and medium-sized firms within five days. Small firms will also be able to report poor payment practices via a ‘mystery shopper’ service.”
The move was announced by small business minister Kelly Tolhurst, as she launched a call for evidence on the issue of late payment.
It will consider the best way company boards can put in place responsible payment practices throughout their supply chain, such as giving a non-executive director specific responsibility for the company’s prompt payment performance.
The government also wants to see the promotion of technology, such as the latest accounting software, to help companies manage their payment processes and empower trade bodies to highlight the best and worst practices in payment behaviour.
The proposals came amid concerns that a quarter of UK businesses report that late payments are a threat to their survival. Meanwhile critics of the Prompt Payment Code have asserted that it isn’t working when it allows signatories like Carillion to pay on terms of over 120 days.
Tolhurst said: “Over the past five years the amount owed to businesses in late payments has halved, but we will go further to make sure all of our small businesses are treated fairly.
“Today’s new call for evidence will help us identify the most effective way possible to tackle this issue once and for all and ensure small businesses are on a level playing field with their larger counterparts.”
Cabinet Office Minister for Implementation Oliver Dowden said: "We expect the highest payment standards from both government and big business.
"That is why we will commit to central government aiming to pay 90% of undisputed invoices from small and medium sized businesses within five days. Small firms can also report poor payment practices via our Mystery Shopper service, which ensures their voices are heard.
"We are listening to businesses and doing more than ever to level the playing field for small businesses to win work in the public sector."
The publication of the new call for evidence follows an announcement by the business secretary Greg Clark earlier this week where he set out other new measures to support small businesses, including:
- the Small Business Commissioner to join the Prompt Payment Code’s Compliance Board to support his role in tackling late payment
- the compliance board of the Prompt Payment Code to consider all complaints made about compliance as part of regular reviews, and report on all cases of signatories being removed from the Code
- further reform to the Code to be considered including whether the Small Business Commissioner should have a greater role in its administration
Small Business Commissioner Paul Uppal said: “I welcome the opportunity to join the Prompt Payment Code’s Compliance Board. I am looking forward to working with the Prompt Payment Code Administration Team and improving current processes to ensure timely payments, which will encourage growth and productivity for SMEs across the UK.
