The UK government has strengthened the Prompt Payment Code (PPC) so that companies that have signed up to the scheme will be obliged to pay small businesses within 30 days – half the time outlined in the current Code.
The move comes as the government seeks to strengthen the powers of the Small Business Commissioner (SBC) to ensure larger companies pay their suppliers on time.
New powers proposed in a recently closed consultation include legally binding payment orders, launching investigations and levying fines.
Despite almost 3,000 companies signing the PPC, poor payment practices are still rife, with many payments delayed well beyond the current 60-day target required for 95% of invoices. Currently, £23.4 billion worth of late invoices are owed to firms across Britain, impacting on businesses’ cash flows and ultimate survival.
Under the new reforms, businesses owners, finance directors and chief executive officers will be required to take personal responsibility by signing the Code, and acknowledge that suppliers can charge interest on late invoices under it, and that breaches will be investigated.
Those signed up to the Code will redouble their efforts to ensure payments are made on time and breaches will continue to be publicised by the government to encourage compliance.
Following the announcement, James Talman, chief executive of the National Federation of Roofing Contractors (NFRC), said: “The requirement for signatories of the PPC to pay 95% of invoices from small businesses within 30 days is extremely welcome.
“The COVID-19 pandemic has slowed down payment to specialist contractors even further with one of our members waiting up to four months for payment from one client last year. It is now essential that the PPC is effectively enforced, so that the announcement proves to be more than just good intentions.”
