According to Bacs, companies across the UK are currently owed more than GBP36.5bn in late payments, affecting one million small and medium sized businesses. This record figure has provoked the Business and Enterprise Minister, Michael Fallon, to “go to war” on the issue of late payments after hearing complaints from small and medium-sized businesses.
The Prompt Payment Code is run by the Institute of Credit Management on behalf of the Department for Business. Signatories to the Code commit to paying their suppliers within clearly defined terms, and commit also to ensuring there is a proper process for dealing with any issues that may arise. Mr Fallon is urging the largest companies to become signatories to the Code, which is five years old this month, in a bid to improve the current state of late payments from the UK’s largest companies to their smaller suppliers. Many firms have to wait half a year before receiving payment for the services they provide to larger companies, with the Business Minster revealing that he heard of a well-known company with a payment process approaching 200 days.
“Large companies are sitting on an awful lot of cash at the moment and it is simply not fair if they don’t pay their suppliers or sub-contractors on time,” Mr Fallon said. He continued, “I wrote to all chief executives [in the FTSE 350] back in October, since when 54 more companies have signed up, half of those from the FTSE 350, but there are still many more to go. And next month I am going to list those who haven’t signed. They have got another month to sign up.”
Surrey-based SmartDebit have experienced an increased interest in Direct Debit collections for business-to-business payments over the past few years. A spokesperson from the bureau commented, “Poor cash flow in any circumstances can cause small firms to go out of business, let alone in the current economic climate. Many of our clients have begun using our Direct Debit service because they want to take control of their cash flow, and receive their owed monies on time, every time.”
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