As a small business owner, you’re probably all too familiar with late payments and the headache they can bring for your business.
Currently, over 50,000 businesses close every year because of this issue, and in the last two years alone, UK SME late payment debt has grown by £10.4 billion
There’s no doubt that the late payment crisis has been going on for far too long, and it has only been made worse by Covid-19.
However, January brought good news for business owners! The UK government announced new reforms to the Prompt Payment Code (PPC) in a bid to ‘crack down on delayed invoices owed to small businesses.
What is the Prompt Payment Code
The Prompt Payment Code (PPC) is a voluntary code that was set up by the UK government to promote payment best practice and improve cash flow for businesses in the UK by tackling late invoice payments.
The PPC aimed to establish the gold standard in payment terms, previously requiring all signatories to commit to paying 95% of its invoices within 60 days.
The UK Prompt Payment Code ethos
The Office of the Small Business Commissioner (SBC) created a code of conduct to be followed by all signatories. In the past, organisations that have been found to not adhere to the code’s ethos have had their name listed on the suspended signatory list on the PPC website.
The ethos requires businesses to:
- Pay suppliers on time within the agreed terms.
- Provide suppliers with clear guidance on terms, dispute resolution and prompt notification of late payment.
- Support best practice throughout their supply chain by encouraging adoption of the code.
Reforms to the Prompt Payment Code
As mentioned, in January 2021 reforms to strengthen the existing code were announced by the government.
In a press release issued by the Department for Business, Energy & Industrial Strategy on the 19th January, the government stated that ‘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.’
As a result, further measures are being taken to support SMEs and tackle late payments through this difficult economic time.
Under the new reforms, from 1st July 2021 signatories will be required to pay small businesses within 30 days as opposed to the current 60 day period.
More immediate changes to the Code include:
- The requirement of a business owner, financial director or CEO to personally sign the Code and ensure responsibility for payment practices is taken seriously.
- Acknowledgement that by signing the Code, signatories understand that suppliers will be able to charge interest on late invoices.
- Acceptance that any breaches to the Code will be investigated by its administrators (the Chartered Institute of Credit Management CICM).
- The introduction of a new logo that signatories will be required to use in their external communications to prove their commitment to good payment practices.
Penny removes late payment worry
Whilst the Prompt Payment Code reforms provide a huge step in the right direction, there are still only 3,000 signatories on board.
When compared to the millions of companies trading in the UK, it remains more important than ever for more organisations to sign up and show their commitment to promptly paying suppliers.
With Penny, you need not worry about whether firms will adhere to the PPC’s reforms. Created to ‘allow small business owners to enjoy life by removing money worry’, at Penny we provide an invaluable service, a lifeline for smaller businesses that rely on substantial working capital.
With the option to sell your business’s invoices to use for a small fee, you can receive money owed upfront, often in just 24 hours. Once you sell your invoice to us, it is no longer your responsibility to collect payment from customers or clients.
Our funding solution works well for small businesses, because it guarantees cash flow and eliminates the risk of late payment. What’s more, Penny is covered through bad debt insurance, so in the event we are unable to retrieve cash from your client, you don’t need to worry. Non-payment becomes a non-issue for you - we have it covered!