In case you missed it, last month, the UK government has launched a new Fair Payment Code to replace the Prompt Payment Code. This aims to save small firms an estimated £22,000 per year. The Code is part of a broader strategy to improve access to cash and ensure timely payments, which the government says are critical for the sustainability and growth of small enterprises.
The Fair Payment Code is designed to address the longstanding issue of late payments, which has been a major challenge for small businesses. By enforcing stricter payment terms and promoting a culture of prompt payments, the Code aims to alleviate cash flow problems that often hinder small firms' operations and growth prospects. Its key elements include:
- Mandatory payment terms: Large companies will be required to adhere to specific payment terms when dealing with small businesses, ensuring that invoices are settled within a reasonable timeframe.
- Transparency and accountability: Businesses will need to publicly report their payment practices, fostering greater transparency and accountability.
- Support for small firms: The code will provide small businesses with resources and support to manage their cash flow more effectively and navigate financial challenges.
Businesses of any size can join the Fair Prompt Code by applying for a Gold, Silver or Bronze Award. The award depends on their payment practices (for example, a Gold Award is for firms paying at least 95% of all invoices in 30 days).
It remains to be seen how much of an effect this will have. A supplier has limited redress under the Code if a signatory breaches it - they can complain to the Small Business Commissioner about the status of a particular signatory.
If you require your suppliers to be a signatory to the Prompt
Payment Code, we advise that you update your contracts to refer to
the Fair Payment Code, and specify an award level if
required.
" We want suppliers paid within 30 days with payment beyond the due date a rare event. We want longer contractual payment term to be recognised as potentially detrimental to vital supply chain "
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
