Is the Prompt Payment Code making any difference?
Has the Prompt Payment Code saved the necks of small businesses, or is it business as usual for the heavy hitters?
Anybody who runs a small business will be all too familiar with feeling like a credit provider for bigger businesses. But eight months after the launch of the Institute of Credit Management’s Prompt Payment Code, has it done any good? As of May 2009, 19 of the FTSE 100 companies had signed up to the code including familiar names like British Airways plc, B&Q and Sony UK.
If you’re unfamiliar with the code, it requires companies that sign up to the scheme to:
- Pay suppliers on time
- within the terms agreed at the outset of the contract
- without attempting to change payment terms retrospectively
- without changing practice on length of payment for smaller companies on unreasonable grounds
- Give clear guidance to suppliers
- providing suppliers with clear and easily accessible guidance on payment procedures
- ensuring there is a system for dealing with complaints and disputes which is communicated to suppliers
- advising them promptly if there is any reason why an invoice will not be paid to the agreed terms
- Encourage good practice
- by requesting that lead suppliers encourage adoption of the code throughout their own supply chains
It seems that even with the code in place and big names signing up, it’s not working for everyone. A recent survey carried out for the Forum of Private Businesses (FPB) found that the late payment burden for small businesses is still a problem. Fifty-six percent of the respondents reported a worsening of the situation and 24% said the subsequent cash flow difficulties it caused were a ‘key issue’ affecting their business. So who’s guilty?
The FPB is running a ‘name and shame’ campaign for big businesses that are putting unfair pressure on suppliers through unreasonable payment terms, often unilaterally enforced on suppliers with little choice. Argos and Carlsberg (who recently notified their suppliers of an increase in payment terms to 95 days) are among the offenders listed. As the second review of signed-up companies approaches in November, when supplier referees are contacted to confirm their adherence, we should get a clear idea of how well the scheme is working.
If you are a supplier to a large company whose payment practices are causing you big problems, you can contact the FPB on 0845 612 6266. Or, for advice on bridging any cash flow gaps call Cashflow UK on 0800 132 156.
