Government announces more measures to tackle late payment

The government has announced measures to strengthen the Prompt Payment Code and reduce the financial pressure on businesses.

The measures are outlined in a letter to signatories of the code from Small Business Minister Margot James, and Philip King, Chief Executive of the Chartered Institute of Credit Management.

These are some of the key points:

• Central government departments have repeated their commitment to the target of paying 80% of undisputed invoices within 5 days, and the remainder within 30 days. Departments are publishing their performance against these targets quarterly.
• Legislation is in place to cascade 30-day terms down the supply chain for all public sector work.
• For public sector contracts, businesses can make use of the Mystery Shopper service. This is a free service where suppliers can report poor procurement practice and late payment, including late payment through the supply chain.
• The government is creating a Small Business Commissioner, who will provide help and advice to businesses, including on payment disputes.

The letter goes on to say: “We confirm that we believe Code signatories should pay within 30 days, and that this should increasingly be the norm. But the Code Compliance Board will not be enforcing compliance with this. Paying invoices within 60 days is a requirement, unless there are exceptional circumstances. We have been giving careful thought to what ‘exceptional circumstances’ may be.

“We do not consider it appropriate to set prescriptive criteria for ‘exceptional circumstances’, as the Board will need to consider each particular case. We prefer for the Board to set the standard through examples of ‘good practice’ which will emerge, and enable them to develop their approach as they review cases.

“We believe this flexibility will recognise different practices in different sectors, ensuring signatories continue to define and identify their smaller suppliers for preferential treatment, and allowing new signatories to join.

“An example of ‘exceptional circumstances’ might include instances where a company is able to demonstrate that they apply different terms to the benefit of their smaller suppliers (e.g. that they pay all of their small suppliers in a shorter period). However, it should be stressed that 60 days terms should be the maximum in the vast majority of cases.”

We shall keep clients informed of developments.

Please contact Gavin O’Donovan if you would like more information about debt collection and credit control.