At a recent meeting between Henry Bellingham, MP for North West Norfolk and members of the West Norfolk Chamber Council, the topic of prompt payment was raised. Several members had examples of where they had been required to wait over 90, or even 120 days for payment from their clients, who were in turn were waiting for payment from their customers. This was particularly apparent where large organisations, especially some supermarkets were the end users.
One suggestion put forward was for the affected members to write to theircustomers and query if they had signed up to the Prompt Payment Code (PPC). The PPC is supported by the major business organisations, including the British Chambers of Commerce (BCC); the FSB; CBI and the IOD, who are all championing the importance of paying suppliers promptly and within agreed timescales.
The PPC has three key aims:
1. Pay suppliers on time
- within the terms agreed at the outset of the contract
- without attempting to change payment terms retrospectively
- without changing practice on length of payment for smaller companies on unreasonable grounds
2. Give clear guidance to suppliers
- providing suppliers with clear and easily accessible guidance on payment procedures
- ensuring there is a system for dealing with complaints and disputes which is communicated to suppliers
- advising them promptly if there is any reason why an invoice will not be paid to the agreed terms
3. Encourage good practice
- by requesting that lead suppliers encourage adoption of the code throughout their own supply chains
A survey carried out by the BCC last year on late payments, highlighted that 94% of businesses reported that they have been paid late. Almost one quarter (24%) of businesses reported that over 40% of payments were received late. 34% of firms stated that larger businesses were more likely than smaller businesses to pay late. Almost two-thirds (62%) of businesses said that private sector businesses are the most likely to pay late.
Over a third (38%) of businesses themselves admitted to paying late ‘sometimes’, ‘frequently’ or ‘always’. When asked when they might pay late, a third of businesses (35%) would do so to help cash flow, and another third because they would be unable to pay suppliers until they had received payment from their own customers.
Prompt payment, particularly by larger organisations ensures that the local supply chain and cash flow throughout that supply chain is kept moving. A healthy, fluent supply chain will help support and improve local economic growth.
It is noted that the public sector has improved their payment times and in particular, the King’s Lynn and West Norfolk Borough Council have a payment schedule of approximately 10 days, which benefits West Norfolk businesses considerably. SMEs look forward to the day when the larger private sector organisations adopt similar principals with regard to prompt payments.
