The overhaul of the Prompt Payment Code (Code) to crack down on delayed invoices owed to small businesses has come into force today.
This has come as good news as under the new reforms companies that have signed up to the PPC will be obliged to pay small businesses within 30 days - half the time outlined in the current code. Despite almost 3,000 companies signing the Code, 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 flow and ultimate survival.
As well as the reduction in payment time, the changes also include the following:
- Requiring a company's CEO or Finance Director (or business owner where it is a small business) to personally sign the Code to ensure responsibility for payment practices is taken at the highest level of organisation;
- Introducing a new logo for signatories to use in external communications to show their commitment to the Code;
- Acknowledgment as a condition of signing the Code that suppliers can charge interest on late invoices; and
- Enabling administrators of the Code to investigate breaches based on third-party information.
According to the Federation of Small Businesses, around 50,000 businesses close every year due to late payments, damaging Britain's prosperity and threatening jobs.
Failure to follow the Code will entail being struck off the Code for poor practice which is publicly announced by the Small Business Commissioner's office. A record of signatories and struck-off companies are maintained on the PCC's and SBC's websites.
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This is not legal advice; it is intended to provide information of general interest about current legal issues.