Late payment of invoices has been identified as the biggest challenge currently facing business - and is cited as the reason that one in four companies go insolvent.
In 2008:
• an estimated 4,000 UK companies failed as a result of late payments
• UK companies paid over £180 million in unnecessary interest charges
There is an immediate challenge for us all to sign up to the Prompt Payment Code and improve our payment practices. It is also clear that there is a need to change current business practice to create a culture of prompt payment between customers and suppliers – the Prompt Payment Code is a positive step to achieving this.
What is the Prompt Payment Code?
Paying suppliers promptly is critical in helping small firms maintain their cash flow and survive. The Prompt Payment Code, devised by the Government with the Institute of Credit Management (ICM), means suppliers can have confidence that any company that signs up will pay within clearly defined terms and that there is a proper process for dealing with any payments that are in dispute.
What will I be signing up to?
Paying 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.
Giving 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 within the agreed terms.
Encouraging good practice
• by requesting that lead suppliers encourage adoption of the Code throughout their own supply chains.
What are the benefits to my business?
Paying promptly is a real benefit to your suppliers and potentially to your customers.
Improved payment terms may lead to better pricing terms which could make your business more competitive.
The Prompt Payment Code isn’t just good for the supplier.
Paying promptly also:
• earns your business respect;
• makes suppliers more likely to offer credit;
• enables you to negotiate better deals or agree prompt payment discount;
• helps avoid late payment or interest charges;
• ensures supplies don’t get stopped;
• improves your trading relationships;
• makes you a more valued customer.
The Prompt Payment Code is being sponsored by a number of the major banks who want to actively support the Code and the positive effect it will have on business.
Once approved, you can use the PPC logo on your documentation and website to show that you are serious about good payment practice.
How do I sign up?
Visit www.promptpaymentcode.org.uk and follow the simple online procedure.
Where can I go for best advice on managing cash flow?
Government has been working alongside the banks, business organisations and financial organisations to ensure that business has access to the very best advice on managing cash flow.
Visit businesslink.co.uk to access a series of cash flow management guides developed in partnership with the Institute of Credit Management or call 0845 113 1234 to speak to a business advisor today.
Where can I go for general business advice?
To access all other national and regional support available to you and your business during the recession visit supportwm.co.uk today.
Business affected by the economic downturn? support is available.
www.supportwm.co.uk can point you in the right direction or call 0845 113 1234 to speak to an advisor now.
This has been brought to you by the West Midlands Taskforce- supporting the West Midlands through the current economic downturn.
West Midlands BERR Manufacturing Advisory Service; Learning and Skills Council; Job Centre Plus; Business Link West Midlands; Acas West Midlands; Advantage West Midlands.
