Government Plans Could See Company Board Members Appointed Responsible for Late Payments

The government has said that it could soon oblige big companies to appoint board members as being responsible for dealing with issues around late payments within their supply chains.

The move would be designed in part to give supplier businesses access to designated non-executive directors with whom they can pursue issues arising from unpaid or overdue invoices.

Business secretary Greg Clark has said that the government intends to set a positive example on payments to suppliers and has promised to ensure that 90 per cent of its non-disputed invoices from SMEs are settled within five days.

Mr Clark also indicated that the government intends to strengthen the existing Prompt Payment Code, which has been criticised as not being sufficiently effective in encouraging big companies to pay their suppliers on time.

The code says that invoices should be paid within 60 days of receipt, except in exceptional circumstances, and that the basic terms of invoices should be routinely adhered to.

Organisations including the Federation of Small Businesses (FSB), have criticised the existing code as being ineffective and pointed out that there are no real consequences for signatories who don’t pay their suppliers on time.

“The voluntary Prompt Payment Code is not working when it allows signatories like Carillion to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime being proposed,” said Mike Cherry, the FSB’s national chairman.

Mr Cherry has welcomed the government’s increased focus on the subject of late payments within supply chains and particularly the proposal to give non-executive directors responsibility for the issue at big companies.

“This is the only way to transform boardroom culture in the UK, where it has become acceptable to pay small firms late if it helps cashflow,” he said in a statement.

A consultation process on the issue of late payments as a whole and how the impact of it might best be offset in the interests of SMEs is to be opened up by government in the coming days.

Mr Cherry from the FSB describes the issue as being “the biggest challenge affecting small businesses” across the country and estimates suggest it now impacts more than 50,000 British businesses on an annual basis.