Written by: Keith Tully
Big companies in the UK are being told by the government to pay their suppliers within 30 days of receiving their invoices.
That timeframe represents a halving of the 60-day period within which companies have previously been advised to pay their suppliers.
The government is carrying out what it is calling a crackdown on late payments by big companies, primarily to help smaller firms avoid serious cashflow problems and insolvency.
The issue of late payments is well understood to be a major headache for SMEs across the country, large proportions of which see their cash flow situations routinely squeezed as a consequence of having their invoices paid late by client companies.
A Prompt Payment Code (PPC) has been established by government and signed by more than 3,000 big companies but problems with late payments have continued so fresh action is being taken.
A revised PPC insists that 95 per cent or more of payments to supplier firms should now be made by big companies within 30 days, rather than 60 days.
Additionally, chief executives and finance directors are being instructed to make personal commitments to uphold the policies outlined by the PPC in the knowledge that breaches can be officially investigated.
It is estimated that around £23.4 billion worth of late invoices are currently owed to businesses throughout the UK, with a huge number of firms feeling the financial pinch as a consequence.
The government has said it wants to clampdown on late payments in order to protect businesses from failure and jobs from being lost, which is viewed as being particularly crucial in the context of the Covid pandemic.
Paul Scully, a small business minister with the government, has said SMEs will be vital to the UK’s recovery from the pandemic and suggested they need protecting as much as possible from issues associated with late payments.
Mike Cherry from the Federation of Small Businesses has welcomed the steps being taken to clamp down on the prevalence of late payments across the SME sector.
“A late payment crisis was massively stifling the UK economy before Covid hit,” he said in a statement. “The pandemic has deepened it. It’s good to see the progress announced today.”
4th March 2021
Chancellor Rishi Sunak has announced that the furlough scheme for employers and the business rates holiday for commercial property occupants in England are both to be extended while the Covid-19 crisiRead More
3rd March 2021
Last March, unprecedented times called for unprecedented measures, with the government announcing a raft of financial support packages to help both businesses and individuals as the Covid-19 pandemicRead More