Healthy cash flow is critical for small business’ survival and growth. Late and long payment times disrupt the cash flow cycle and can prevent a business from paying its bills, eventually leading to business failure. In 2023 15% of small businesses and medium sized enterprises cited cash flow and late payments as an obstacle to running their businesses.
The new Fair Payment Code has been launched to encourage businesses across the UK to pay promptly. Businesses may now apply for the Award tier that best suits them: Gold, Sliver or Bronze. The tiered system of Awards is aimed at awarding best practice and driving improvements in payment performance. The three Award tiers are:
- Gold Award – for those firms paying at least 95% of all invoices within 30 days
- Silver Award – for those paying at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses within 30 days
- Bronze Award – for those paying at least 95% of all invoices within 60 days
In addition, every business granted an Award agrees to abide by the Code’s principles of being Clear, Fair, and Collaborative with their suppliers.
The new Fair Payment Code replaces the Prompt Payment Code. It will be more aspirational by supporting businesses that wish to improve payment practices and helping them move up from Bronze to Silver, and to Gold over time.
The Fair Payment Code Awards are for two years, and every business will need to reapply for their Award at the end of each two-year period. There will also be a robust complaint system in place for businesses to highlight to the OSBC those not meeting the requirements of the category of their Award (Gold, Silver, or Bronze) or not following the principles of the Code.
Businesses can now apply of any Award level of the new Fair Payment Code.
Len Bunton, Owner of Bunton Consulting and FIS resident QS said:
“The Fair Payment Code will be welcomed by the construction industry as it focuses on prompt payment. The introduction of measures to reward businesses for adopting fair payment practices with their suppliers is also a major step forward. It is important to highlight the emphasis on establishing clear and fair payment terms in writing before work begins, and further, that suppliers are made aware if payment is likely to be delayed.
“The Code emphasises fairness and collaboration, with transparency being a key factor as well.”
Small Business Minister Gareth Thomas said:
“Late payments cost businesses tens of thousands of pounds and is one of the biggest reasons businesses collapse and today’s measures look to tackle the issue head on.
“This government’s primary ambition is clear: to go for growth. To do that, we must unleash the potential of our entrepreneurs.”
Liz Barclay, Small Business Commissioner added:
“The Fair Payment Code is our response to all those suppliers who begged for a more aspirational, robust and ambitious approach to changing the business to business payment culture in the UK. It also gives a clear signal of intent on the part of Government.
“We want suppliers paid within 30 days with payment beyond the due date a rare event. We want longer contractual payment term to be recognised as potentially detrimental to vital supply chains. We want businesses of all sizes to commit to fair and quick payments and to avoid harmful disputes. This new Code will drive a better payments culture and benefit everyone.”
For any immediate questions, head to the FAQs page at www.smallbusinesscommissioner.gov.uk/fpc Or you contact the Small Busness Commissioner directly via email at fpc@smallbusinesscommissioner.gov.uk.