Introduced in 2008, businesses have been slow to sign up to the Prompt Payment Code (PPC), under which signatories agree to pay 95% of invoices within 60 days and work toward 30 days.
Despite 360 additional businesses signing up since the remit was transferred to independent body the Small Business Commissioner in March 2020, discussions held in October with small business commissioner Philip King and ACCA members from the private, not-for-profit and education sectors concluded that more should be done to emphasise the benefits to business.
Due diligence
Research indicates that few suppliers do extensive due diligence on payment history, but Ashley Smith FCCA, chair of ACCA’s Corporate Panel, highlighted during the discussions that the PPC can provide a one-stop-shop for credit searches on potential customers. Other discussion participants agreed that the government should work to collate data from the PPC, Companies House and Duty to Report to provide a single overview of a business’s payment history.
‘Prompt payment is treated as a matter of corporate social responsibility within my business to ensure local smaller suppliers are treated fairly’
Find out more
Read ACCA’s submission to the consultation on the Prompt Payment Code
Read more and sign up to the PPC via the Small Business Commissioner
‘The value of prompt payment to small businesses is underappreciated,’ added Peter Lewis, group director of resources at social landlord agency Cartrefi Conwy. ‘Prompt payment is treated as a matter of corporate social responsibility within my business to ensure local smaller suppliers are treated fairly.’
However, participants agreed that the current legislation does not incentivise larger businesses to comply with the code, and that reforms should focus on finding a way to do so. ‘Often larger businesses feel more comfortable applying interest and fines than small businesses that may suffer more from the impacts of late payment,’ said Smith.
Destabilising influence
The discussions also concluded that late payment from large corporate companies has a significantly detrimental impact on the stability of small businesses and creates a ‘domino effect’, prohibiting the smaller businesses they owe from being able to make their own payments to others on time.
The group wholeheartedly supported the use of deterrents to prevent poor payment practices, including transparency around those that pay their suppliers late.
