Using the prompt payment code
I was listening to Radio 5 recently when the debate changed, unexpectedly, to The Prompt Payment Code.
During the ensuing discussion the startling statistic of £30 billion being overdue to small companies by big business was highlighted.
The merits of the Prompt Payment Code, administered by the Institute of Credit Management on behalf of the Department for Business Innovation and Skills, were then outlined along with how you could apply it.
The next day I asked the Finance Director of an online retailer whether anyone ever used this system and to my surprise they said that they were often asked by suppliers for additional amounts under the Prompt Payment Code because they chose to delay payments to suppliers, on occasion, and if those suppliers chose to apply the provisions rather than just wait then so be it. Overall the additional cost of one or two suppliers asking for a bit more was far less than the cost of the next round of funding during the start up phase of that business they said.
Michael Fallon MP, Minister of State for Business and Enterprise has stated that ‘Prompt payment is critical to the cash flow of every business, and especially to smaller businesses within the supply chain. But it is not just the timeliness of payment, though fast payment is always welcome, but rather the certainty of getting paid that is really important, and enables businesses to plan both for their short and longer term futures.
The Prompt Payment Code is about encouraging and promoting best practice between organisations and their suppliers. 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. This means that suppliers can build stronger relationships with their customers, safe in the knowledge that they will be paid, and confident that they are working with a business that values the service they deliver. Independent analysis by Experian suggests that current signatories to the Code represent over 60% of total UK supply chain value, so the Code is making a difference.’
So there you have it: ask your customers whether they have signed up to the Code and if they have perhaps you’ll get paid a little earlier than you might have done or at least know when to expect payment. In which case it’s cash for the price of a phonecall.Talk to Barnes Roffe today