The Prompt Payment Code (PPC) was established in December 2008 and is a voluntary code that sets the standard for payment practices.
In March 2020, the Prompt Payment Code was transferred from the Chartered Institute of Credit Management (CICM) to the Small Business Commissioner’s office to bring all late payment initiatives under a single umbrella.
The PPC encourages and promotes best practices between businesses and their suppliers. Prompt payment is critical for the cash flow of all business, especially small businesses.
As a signatory to the Code, what do I have to agree to?
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
The code requires its signatories to pay 95% of their invoices within a maximum of 60 days but they are encouraged to adopt the best practice of 30 days.
How is the Code monitored?
The code is monitored by the Code Compliance Board who have the power to impose sanction on its signatories. This includes removing signatories from the Code if it is found that they are not complying. If a signatory is removed from the Code, a public statement is issued and they will be listed on the Small Business Commissioner’s website.
Does the Code Compliance Board actually remove businesses from the Code?
Yes, they have recently announced that 5 businesses who were suspended from the Code for non-compliance, have now been reinstated. BT PLC, IBM, Kier Highways, Screwfix and Seddon Construction were all suspended for not paying 95% of their invoices within 60 days. Out of the 5 businesses, Screwfix were the worst by paying just 18% of their invoices within 60 days.
All were required to submit action plans to the Board outlining how they would achieve compliance. Kier Highways are now paying 98% of invoices within the 60 days. The other 4 businesses who have been reinstated are now paying between 90% and 94% and are continuing to work hard to hit the code criteria of 95%.
How will the Coronavirus impact on a signatory’s duty to comply?
The Small Business Commissioner has announced that the PPC requirements will not be relaxed due the coronavirus, as they believe it is important for all businesses to work together during this time. Businesses like Tesco, Morrisons and Vodafone have all been praised for their efforts in supporting their small business supply chain by reducing their time to pay.
You can sign up to the Prompt Payment Code here.
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