The Small Business Commissioner has launched a Fair Payment Code to reward companies that pay their supply chain promptly.
It replaces the Prompt Payment Code and has a tiered awards system including:
- Gold award: for firms paying at least 95% of all invoices within 30 days;
- Silver award: for those paying at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses within 30 days;
- Bronze award: for businesses paying at least 95% of all invoices within 60 days.
Every business granted an award agrees to abide by the Fair Payment Code’s principles of being “clear, fair and collaborative” with their suppliers.
The awards are valid for two years, after which businesses need to reapply. The Small Business Commissioner said that a “robust” complaint system will allow suppliers to report companies that do not meet the requirements of their award category, or follow the principles of the code.
Companies can apply for the code awards here.
Fair and quick payments
Small Business Commissioner Liz Barclay said: “The Fair Payment Code is our response to all those suppliers who begged for a more aspirational, robust and ambitious approach to changing the business-to-business payment culture in the UK. It also gives a clear signal of intent on the part of government.
"We want suppliers paid within 30 days with payment beyond the due date a rare event, and longer contractual payment terms to be recognised as potentially detrimental to vital supply chains. We want businesses of all sizes to commit to fair and quick payments and to avoid harmful disputes. This new code will drive a better payments culture and benefit everyone.”
Data shows that in the UK small businesses are owed, on average, an estimated £22,000 in late payments, accounting for around 18% of invoices. The average time to pay was 32 days in 2023.
Research estimates that SMEs spend 56.4 million staff hours each year chasing late payments, costing £6.3bn a year. The cost of additional finance to cover cash flow shortfalls as a result of late payment to SMEs is £684m a year.
