A group of big businesses have been appointed to enforce and raise awareness of the Prompt Payment Code, an industry-led initiative which aims to ensure that suppliers are paid on time and treated fairly, as part of government effort to change the culture of late payment
Representatives from Aviva, Barclays, Bury Council, City of London Corporation, Fujitsu, Greggs, Skanska and Stort Chemicals are to form a new advisory board tasked with strengthening the code, which sets out the principles for businesses to follow when dealing with and paying their suppliers.
However, the big concern is for smaller businesses, which are constantly facing delayed payments from larger organisations. It is not clear how effective the new body can be since prompt payment is a desire, not a legal obligation underwritten in statute.
Philip King, ICM CEO and co-chair of the Prompt Payment Code Advisory Board said the aim was to create ‘an environment where paying on time is the norm rather than the exception’, stating: ‘The timing is now right for the Code to be further strengthened and developed as a key tool in helping to tackle the scourge of late payment and driving a change in business culture from top to bottom.’
The move is in response to a recommendation from responses to a Department for Business, Innovation and Skills (BIS) discussion paper, Building a responsible payment culture, which sought views on how to tackle the problem of late payment to small suppliers.
The advisory board held its first meeting this week and has said it will aim to implement concrete proposals in spring 2015. Initially, it will be looking at how to improve monitoring and enforcement and promote awareness, and will also provide advice on whether updates are needed.
More than 1,700 businesses and public authorities have so far signed up to the code, which has the support of BIS and was set up in 2008 by the Institute of Credit Management (ICM) as a voluntary agreement promoting good payment practices.
Business minister Matthew Hancock said: ‘Late payment continues to plague businesses, putting a strain on cash flow and preventing plans for growth. We have committed to tackling this problem, but there is no silver bullet. This is about a change in culture, which needs businesses and government to work together. The new advisory board will strengthen the Prompt Payment Code, cracking down on poor practice and showcasing good practice.’
The Small Business, Enterprise and Employment Bill, which is currently before parliament, also contains measures to cut down on late payments in response to the BIS paper, including a new requirement for large companies, large limited liability partnerships (LLPs) and listed companies to report on their payment practices, in a bid to increase transparency around how companies pay their suppliers.