Government to investigate late payment of suppliers

9 February 2012

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9 February 2012 | Angeline Albert 

The government will create a working group to investigate late payment of suppliers and is urging small firms to pursue organisations who delay the settling of bills.

Business minister Mark Prisk this week announced that a group of business representatives will be called upon to examine issues behind late payment of suppliers.

Prisk said: “We have secured the agreement of business representative bodies to come together and establish a prompt payment workshop, to explore these issues more fully and develop business-led solutions. We must continue to promote prompt payment to ensure our small businesses can thrive and grow.”

The government is encouraging SMEs to agree payment terms before delivering orders and wants all businesses to sign-up to the government’s Prompt Payment Code, run by the Institute for Credit Management (ICM). The code promotes best practice between buying organisations and their suppliers. Those who sign it commit to paying their suppliers within clearly defined terms.

Analysis by Experian suggests that current signatories to the code represent more than 60 per cent of the UK’s total supply chain value. Businesses can sign up to it here

The government said it is paying 80 per cent of its own invoices within five days. The Department for Business Innovation & Skills (BIS) paid 93.6 per cent of invoices within five days in December last year, and averaged 95 per cent across 2011.

BIS is recommending that organisations make complaints about late payment by the code’s signatories and use legislation already in place to pursue late payers. The minister also recommended that suppliers adopt electronic invoicing. 

Prompt payment is vital for SMEs, with many firms not able to survive the cashflow problems that late payments create.

Philip King, chief executive of the ICM said: “The only good client is a paying client, and the difficulties of getting paid – and getting paid on time – is a challenge that we all face, regardless of the industry or sectors we serve.”

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