An overhaul of the Prompt Payment Code (PPC) to crack down on delayed invoices owed to small businesses has been announced by the government. Under new reforms, companies that have signed up to the Prompt Payment Code will be obliged to pay small businesses within 30 days – half the time outlined in the current Code.
According to the Federation of Small Businesses (FSB), around 50,000 businesses close every year due to late payments, damaging Britain’s prosperity and threatening jobs.
The changes coming into effect immediately are:
- requiring a company’s CEO or Finance Director, or the 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 an organisation
- introducing a new logo for signatories to use in external communications to show their commitment to the Code, making it more damaging to a company’s reputation to breach it
- acknowledgement as a condition of signing the Code that suppliers can charge interest on late invoices
- enabling administrators of the Code to investigate breaches based on third-party information
In addition, the new requirement for signatories to pay 95% of invoices from small businesses (those with less than 50 employees) within 30 days will be effective from 1 July 2021. The target for larger businesses will remain 95% of invoices within 60 days.
The move comes as the government seeks to strengthen the powers of the Small Business Commissioner (SBC) to ensure larger companies pay their smaller partners on time. New powers proposed in a recently closed consultation include legally binding payment orders, launching investigations and levying fines.