New Prompt Payment Code launched in UK

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New Prompt Payment Code launched in UK (image credit: iStock/JohnDWilliams)

Businesses across the UK could be set to benefit from the launch of a new Prompt Payment Code, which aims to address the long-running issue of late payments that affects many firms.

More than 1,800 firms have now signed up to adhere to this stricter code of practice surrounding the management of payments, with all participants agreeing to implement maximum payment terms of 60 days, although a target of 30 days will be aimed for.

In cases where payment extends beyond the 60-day limit, organisations must be able to demonstrate exceptional circumstances that have led to their inability to make payments or face being struck off the list of accredited businesses.

These cases will be considered by an independent panel, with a focus on ensuring smaller suppliers receive payments more swiftly than their larger counterparts.

Small business minister Margot James 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 businesses signed up to the code commit to demonstrating the gold standard of payment practices and it’s great to see so many of Britain's leading household names on the list."

The UK's small business commissioner will be appointed to provide advice to all organisations hoping to sign up to the Prompt Payment Code, with the voluntary code to be administered by the Chartered Institute of Credit Management (CICM) in the years ahead.

Chief executive of the CICM Philip King noted in a letter to those signed up to the new code of practice that all participants will be leading the way in helping to set a new and more responsible payment culture for the whole of the UK.

Measures to tackle the ongoing issue of late payments for many UK organisations were revealed last year as part of the Small Business, Enterprise and Employment Act 2015. This introduced a statutory duty for all large businesses to report on their payment practices and will come into force in early 2017.

The new Prompt Payment Code serves to further prevent late payments causing issues for many of the UK's smallest and most vulnerable businesses, as delays in payments can produce a significant drag on the economy as they work down the supply chain.