SMEs to benefit from a Prompt Payment Code overhaul.
23rd July 2019.
An overhaul of the Prompt Payment Code could benefit the small businesses and provide better protection from late payments.
The government scheme designed to encourage big businesses to pay suppliers on time is due to be overhauled in an attempt to give small companies better protection.
The prompt payment code, under which large companies promise to pay 95 per cent of their invoices within 60 days, is expected to be taken over by the government’s small business commissioner, who has made it clear he favours implementing tougher qualifying criteria.
Last week eighteen large businesses were suspended from the code for failing to meet its criteria. In the previous quarter a further seventeen fell foul of the code.
In future businesses could find it even harder to measure up without fundamentally changing their view of paying their suppliers.
The Prompt Payment Code was launched in 2008 to tackle a culture of late payment of commercial debts among large businesses. Most would admit that the late payment culture stranglehold on the UK economy has not dissipated.
The Prompt payment code has been criticised for being slow to respond when signatories mistreat suppliers – although the recent suspensions show that it is already getting tougher.
The Chartered Institute of Credit Management, which runs the code for the government, has taken a much tougher approach this year, launching two waves of suspensions and expulsions of signatories found to have been breaching its terms.
Last week saw the following large businesses suspended from the code for failing to pay suppliers within agreed terms.
- Severfield (Design & Build)
- Stantec UK
- Screwfix
- Prudential
- British American Tobacco (Holdings)
- Galliford Try
- Alun Griffiths
- Ferrovial Agroman (UK)
- BAE Systems Global Combat Systems
- BAE Systems Applied Intelligence
- BAE Systems (Oman)
- Centrica
- Maintenance Management
- Fujitsu Services
- De La Rue Holdings
- Domino UK
- BT plc
- AB World Foods
However, Paul Uppal, the commissioner, is understood to want an even more radical approach. He is due to take over the running of the prompt payment code when the government implements a raft of proposals.
It is suggested that the commissioner may go as far as removing all 2,305 signatories from the code, including many of Britain’s largest public and private sector organisations, and starting from scratch with the nations large businesses needing to demonstrate stronger evidence of fair treatment of suppliers in order to be re-join the new and improved code.
A spokeswoman for the commissioner has declined so far to comment on his plans for the code.
Mr Uppal is also expected to be given the power to fine late payers. His role was among the topics of discussion last week at a late payment summit between business leaders and Philip Hammond, the chancellor, held at Downing Street. More than one in ten companies struggle to pay their staff and other costs due to late payments, the government said. Mr Hammond accused offenders of “unacceptable behaviour” after the meeting.
With Mr Hammond due to re-sign today, it remains to be seen how his successor feels about the issue.
Other topics of discussion included a loophole that allows large businesses to dodge a requirement to report payment practices to a national database twice a year. They can avoid the requirement simply by contracting and paying for services via a smaller subsidiary.
The Federation of Small Businesses indicated that Mr Hammond had been a key ally in driving through late payment reform and called for his successor to be equally supportive. Craig Beaumont, director of external affairs at the federation, said: “We will be looking for reassurance that he or she will be just as strong in implementing the late payment plans.”
PM should offer SME support
SMEs are flavour of the week.
The Telegraph’s Liam Halligan believes that the next Prime Minister should seek to offer support for SMEs, “the engine room of UK innovation and growth.”
He says that SMEs “are far more significant” than PLCs as they are “insulated from the short-termism that dogs so many PLCs, with their reams of fickle shareholders.”
He says that the UK’s 4.8m SMEs, which account for 88% of all firms, desperately want the mechanics of business to be made as simple as possible, pointing to tax and regulation. Mr Halligan backs calls for a Single Consolidated Tax, a proposal from the Centre for Policy Studies think-tank which would see firms with turnover of less than £1m opt out of the existing tax setup, paying a tax calculated as a flat percentage of revenue.
The firms would be freed from VAT, Corporation Tax, employers’ national insurance and business rates, while the t ax take would be maintained by the flat rate being set at 12.5%.
What is the code? – The Prompt payment code
The Voluntary Code is administered by the CICM on behalf of the Department for Business, Energy and Industrial Strategy (BEIS). Signatories pledge to uphold its best practice for payment standards to end the culture of late payment.
1. Pay suppliers on time
Within the terms agreed at the outset of the contract
Without attempting to change payment terms retrospectively
Without changing practice on length of payment for smaller companies on unreasonable grounds
2. Give clear guidance to suppliers
By providing suppliers with clear and easily accessible guidance on payment procedures
By ensuring there is a system for dealing with complaints and disputes which is communicated to suppliers
By advising them promptly if there is any reason why an invoice will not be paid to the agreed terms
3. Encourage good practice
By requesting that lead suppliers encourage adoption of the code throughout their own supply chains
visit the prompt payment code site
Visit the website payontime.co.uk and become a supporter to show your support for late payment legislation.
What CPA says
In April, the Prompt Payment Code removed 5 companies and suspended 12 others for mistreating suppliers and ignoring rules of the code.
Last week a further eighteen companies were suspended from the Prompt Payment Code for failing to pay suppliers on time.
Last month we wrote about the new government proposals to tackle late payments.
You can see the Governments full document here : Creating a responsible payment culture: a call for evidence in tackling late payment: government response
We responded to those proposals in this blog, pointing out the gaps in the plan
The late payment culture still has a stranglehold on the UK economy. Until the culture ends of making suppliers wait well beyond reasonable credit terms for payment, the UK economy will never meet its full potential.
We therefore welcome any strengthening of government action on late payments and we welcome any light shone on the subject.
However Government alone cannot solve this issue. It will take concerted action from suppliers to say enough is enough and we will not accept late payment anymore as cost of doing business.
CPA is working with SME suppliers to send that message to business customers.
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cash-flow.
Don’t let your bankers control you, contact CPA today.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Do you realise you could be sitting on a fortune?
Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.
If you sold B2B on credit then there may be a hidden source of capital you can call on.
If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.
Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.
We can help you uncover the pile of gold, you didn’t even know you were sitting on.
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.
Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.
You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.
That compensation could provide the cash boost your business needed.
But don’t delay, that compensation evaporates if not claimed within six years of the late payment.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping business owners who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
Those former clients who regularly paid you late can finally be made to pay.
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
Do you sell on credit?
With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.
Those customers will look for the easiest option to boost their cash-flow. Don’t let it be you.
You can’t just assume your customers can and will pay you eventually, no matter how big their name is.
It is essential to have credit management systems in place to monitor and check your customers credit worthiness.
It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.
See the section below – About CPA.
About CPA
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply on credit, help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Ready to speak to an advisor?
For help or advice on credit management, entirely without obligation.
Call us today
0330 053 9263
The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!
The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections
Keep up to date with the latest news by following us on social media:-
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The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections