Signatories to the government’s Prompt Payment Code (PPC) will now have 30 days to pay small businesses as part of new reforms to crack down on delayed invoices.
The new target slashes payment times to small firms from the 60 days that was originally required.
Chief executives or finance directors of companies signed up to the PPC will also have to make a personal commitment to the new targets by signing the code and acknowledging that suppliers can charge interest on late invoices.
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.
The government has also pledged to investigate breaches of the code, making any confirmed breaches public. Meanwhile, a new logo has been created for signatories to use in external communications to show their commitment to the code.
Around 3,000 companies are signed up to the PPC but the government warned that poor payment practices are still “rife”, with many payments delayed beyond the current 60-day target required for 95% of invoices.
The move comes as the government seeks to strengthen the powers of the Small Business Commissioner (SBC) to ensure larger companies pay their smaller partners on time. New powers proposed in a recently closed consultation include legally binding payment orders, launching investigations and levying fines.
Small business minister Paul Scully said: “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.”
Interim small business commissioner Philip King said: “Late payment causes real hardship to small businesses, and the issue is more prevalent than ever due to the continued impact of the pandemic. Code signatories of all sizes demonstrate their commitment to ending the culture of late payment and helping to increase business confidence. I encourage businesses of all sizes to implement ethical business practices and sign up to become a Code signatory and join us on our journey to aid business recovery post covid-19”.
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This is a tremendous step forward and congratulations to all those who have been campaigning for smaller companies to be paid more promptly and given greater right within our industry.
I very much hope this will lead to significant reduction in small entrepreneurs losing their livelihoods through no fault of their own,