The government has confirmed it is to appoint a small business commissioner who will provide help and advice to businesses, including on payment disputes, and is strengthening the voluntary code for large suppliers, although it has stopped short of enforcing a 30-day payment rule
Over 1,800 firms are signed up to the Prompt Payment Code (PPC), agreeing to maximum payment terms of 60 days, with the pledge confirming they should aim to pay within 30 days.
Small business minister Margot James and Philip King, chief executive of the Chartered Institute of Credit Management (CICM), which administers the code, have now written to businesses saying that if payment terms stretch beyond 60 days, companies must demonstrate that ‘exceptional circumstances’ apply.
The letter states that code signatories should pay within 30 days, and that ‘this should increasingly be the norm’.
However, it goes on to say that the Code Compliance Board will not be enforcing compliance with this. It states: ‘Paying invoices within 60 days is a requirement, unless there are exceptional circumstances.
‘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.’
The letter also points out that from 6 April 2017 large businesses will have a statutory duty to report on payment practices, introduced by the Small Business, Enterprise and Employment Act 2015. It suggests PPC signatories should voluntarily provide information as soon as the website goes live, but details of the metrics required will not be available until the autumn.
The letter also confirms that the small business commissioner will be appointed to give advice and support on payment issues. The government will shortly consult on how the commissioner will operate and handle complaints from small businesses.
Margot James, small business minister, said: ‘Prompt payment can make all the difference to small businesses, boosting their cashflow and allowing them to invest in growth for the future. Although we have seen some progress, there are still too many business owners across the country who have not been paid on time by their customers.
‘We need a culture change to stamp this out and the Prompt Payment Code continues to play an important role in bringing this about, alongside a package of measures taken forward by government and industry.’
The letter from James and CICM is here.
