Prompted by the collapse of Carillion and widespread outrage about its back-stop of 120-day payment terms despite being signed up to the prompt payment code, the move to pay 90% of undisputed invoices from SMEs within five-days, comes as the Government tries to reboot its late payment measures with a call for evidence on the best way to tackle the scourge once and for all. Some of the latest measures being looked at are empowering trade bodies to highlight the best and worst practices in payment behaviour and forcing company boards to have a non-executive director responsible for prompt payment performance.
Small Business Commissioner Paul Uppal will join the Prompt Payment Code’s Compliance Board to try and reassert its relevance to industry.
Further reform to the Code is to be considered including whether the small business commissioner should have a greater role in its administration.
FIS chief executive Iain McIlwee commented; “You can’t argue with the sentiment, but we have proven time and again that there is no sticking plaster to the endemic problem of unfair payment. There are a multitude of ways in which dues are not paid and retentions is front and centre. We fully support the Build UK aim to ban retentions, but the timescales concern us. Cashflow and the resultant contractual wrangling undermine absolutely collaboration and productivity in construction, to truly emerge as a world-class sector we need to move to a 21st Century way to ensure money flows effectively through the supply chain and no business, small or large is put at risk by archaic and unfair practices.”
Cabinet Office Minister for Implementation Oliver Dowden said: “We expect the highest payment standards from both government and big business.
“That is why we will commit to central government aiming to pay 90% of undisputed invoices from small and medium-sized businesses within five days. Small firms can also report poor payment practices via our Mystery Shopper service, which ensures their voices are heard.
“We are listening to businesses and doing more than ever to level the playing field for small businesses to win work in the public sector.”
Federation of Small Businesses, national chairman Mike Cherry said: “Late payment is the biggest challenge affecting small businesses and it is good to see the government getting serious about this issue, especially when it comes to large firms paying their supply chains promptly.
“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.
“It is a positive step that central government will set an example – paying 90% of undisputed invoices from small and medium-sized businesses within five days.”
The Government call for evidence will be open until 29 November and the government is encouraging, businesses, trade associations and other interested parties such as academics to contribute their views to it.