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The Prompt Payment Code

Prompt Payment is a commercial discipline which requires businesses to:

·Agree fair and reasonable payment terms with suppliers

·Ensure suppliers’ invoices are approved and paid within agreed terms

·Encourage adoption of the same practices throughout their supply chain.

Here in the UK the Code is hosted and managed for the government by the Chartered Institute of Credit Management and businesses are encouraged to sign the Prompt Payment Code to demonstrate their commitment to adopt a prompt payment culture.

The Prompt Payment Code (PPC) sets out standards for payment practices and best practice and compliance with the principles of the Code is monitored and enforced by the Prompt Payment Code Compliance Board.  The Code deals with prompt payment and wider payment procedures. 

The UK government leads by example and has made a public pledge to support the prompt and reliable payment of invoices by signing up to the Code.  The UK government has published statutory guidance for public sector buyers and suppliers on paying valid, undisputed invoices within 30 days and tis came into force in February of 2015.  Public sector buyers must pay prime contractors within 30 days and must also ensure that these prime contractors include equivalent 30 day payment terms in any subcontracts through the supply chain.  Government departments are required to report their performance against these payment targets on a quarterly basis as required in the Budget 2015.

Where a public sector buyer has not paid an undisputed and valid invoice within 30 days suppliers may claim statutory interest.  A digital payment solution has been introduced to speed up the payment process with all departments being required to accept structured e-invoices (invoices which are sent by email) in order to save money on processing costs and improve efficiency.

When it comes to large companies that have signed up to the Prompt Payment code but do not pay their suppliers within a reasonable time period, their names are removed from the list of strategic suppliers signed up to the PPC.  UK Business Minister, Matthew Hancock, states that “making small businesses wait an unreasonable time for payment is entirely unacceptable”.  He stresses that it puts an unfair strain on small business owners and their family finances and advocated that large companies should lead by example and pay small suppliers within 30 days.

Any SME owners who have experienced problems receiving payment from larger companies that have signed up to the PPC can use the Challenge section of the PPC website to challenge the status of a signatory.  This will then undergo investigation and the Chartered Institute of Credit Management (CICM) will contact the late paying company and, where necessary, mediate between both parties.  The Code Compliance Board will determine whether the large company should be removed from the PPC list of companies.

These are all measures that are designed to level the playing field for SMEs here in the UK and help to ensure the regular cash flow necessary for smaller businesses so that they only need to look for a debt recovery solution in the most serious of cases.