A new government initiative aimed at cracking down on persistent late payers looks likely to come into force this autumn. As part of the prompt payment initiative, companies will be banned from winning government contracts if they pay suppliers late.
The need for a prompt payment initiative
Despite the voluntary Prompt Payment Code being set up in 2008, there are still companies who persistently pay suppliers late. Last month the government took the decisive step of suspending 17 big name companies from the code. These included the likes of Vodafone, DHL and Rolls-Royce.
Those companies that have been suspended have been warned they need to make improvements to comply within an agreed period. If not, they face being removed from the Code.
As part of the Prompt Payment Code, companies agree to pay 95% of their suppliers within 60 days on private sector jobs. By law, suppliers must be paid within 30 days on all public sector work.
If they fail to achieve this, businesses risk being banned from future public sector contracts. The new government prompt payment initiative will see some companies having to produce payment record data when they bid for public work. The two previous six-month reporting periods will be used to assess their payment history.
The benefits of prompt payment
A high number of unpaid invoices can hit small companies hard. The problem of larger companies paying slowly causes cash flow problems and makes SMEs resistant to taking on big contracts.
The government’s new initiative aims to take the stress out of working in the public sector and make it more small business friendly. However, it is still only aimed at the top strands of the business chain. As such, can it be seen as a huge step forward from the current Prompt Payment Code?
The only companies that will need to report on their payment data are those that meet at least two of the following criteria:
– annual turnover of £36m
– balance sheet total of £18m
– 250 employees or more
Small business debt recovery
The statistics on the late payment of invoices and the need for debt collection shows how widespread the problem is. Small businesses are owed on average £31,055 from customers according to research for QuickBooks.
More than a third (38%) of those UK small businesses with cash flow issues have been unable to pay their own debts. This is also causing problems when taking on new work and they are losing on average £26,000 by having to turn down jobs because of a lack of cash flow.
Help with late payments
Don’t leave your cash flow problems until it is too late. Acting promptly with late payers can reduce the risk of damaging your own business cash flow. Using a third party to collect unpaid invoices can often be the right direction to take.
Rather than having to stress about chasing customers for the non-payment of invoices, a commercial debt recovery company can do all the hard work for you. At CEA Ltd we work with a number of small and medium-sized businesses to help them take charge of their debt recovery.
Whether it’s dealing with a persistent non-payer or a new customer who is slow to clear their invoices, we can help you get your money paid quickly. Contact us today and discuss your case with one of our team to get started recovering your unpaid invoices.