Firms signed up to the Prompt Payment Code have been told to pay invoices within 60 days.
In a letter to the code’s more than 1,800 signatories, UK small business minister Margot James said the government was “leading by example” by committing to paying 80% of undisputed invoices within five days and the remainder within 30 days.
James said legislation was in place to “cascade 30-day terms down the supply chain for all public sector work”.
The letter said that “we believe code signatories should pay within 30 days, and that this should increasingly be the norm”.
“But the Code Compliance Board will not be enforcing compliance with this,” said James. “Paying invoices within 60 days is a requirement, unless there are exceptional circumstances.”
The letter said criteria for exceptional circumstances had not been set and the board would consider each case.
“An example of exceptional circumstances might include instances where a company is able to demonstrate that they apply different terms to the benefit of their smaller suppliers (for example that they pay all of their small suppliers in a shorter period). However, it should be stressed that 60 day terms should be the maximum in the vast majority of cases.”
James said following a consultation last year the post of small business commissioner would be established “who will provide help and advice to businesses, including on payment disputes”.
The letter also said that from 6 April 2017 large firms would be required to report on payment practices under the Small Business, Enterprise and Employment Act 2015. “In the spirit of the code, we would encourage you to lead the way by voluntarily providing information as soon as the website goes live.”
The letter is jointly signed by James and Philip King, chief executive of the Chartered Institute of Credit Management, which is administering the code on behalf of the Department for Business, Energy and Industrial Strategy.