The Government has confirmed that large businesses that have signed up to the Prompt Payment Code (PPC) must pay small businesses within 30 days.
The news comes as the Government has estimated that there are currently £23.4 billion worth of outstanding late invoices in the UK, with late payments becoming even more of an issue throughout the coronavirus pandemic.
The move will see payments to firms with fewer than 50 employees made within 30 days, while the current 60-day time limit will remain for payments to larger businesses.
The PPC is a voluntary code which more than 2,800 businesses have signed up for. Under the code, 95 per cent of invoices must be paid within 60 days of firms will be publicly struck off the code until they make significant changes to their payment procedures.
Either the Chief Executive or Finance Director of a company must personally sign onto the PPC, with the intention of ensuring that fair and compliant payment practices are adhered to at all levels of the business.
The changes mean that suppliers can charge interest on any late invoice, while administrators can then investigate breaches of the code based on information given to them.
Recent data from the Federation of Small Businesses indicates that 50,000 businesses close every year because of the impact of late payments, with the FSB stating that ending the UK’s ‘poor payment culture’ will help to boost economic recovery.
Phillip King, Interim Small Business Commissioner, said: “Late payment causes real hardship to small businesses, and the issue is more prevalent than ever due to the continued impact of the pandemic.
“Code signatories of all sizes demonstrate their commitment to ending the culture of late payment and helping to increase business confidence.”
For help and advice on matters relating to late payments, cash flow and budgeting, contact our expert team today.