Business minister Michael Fallon is hoping to encourage more large corporations to sign up to the good payment practice, and is using a naming and shaming policy to do so.
Fallon has written to all FTSE 100 and FTSE 250 businesses urging those firms to sign up to the Prompt Payment Code.
The Code, which was brought in by the Institute of Credit Management four years ago, is said to demonstrate ‘good practice’ and signatories are obliged to pay suppliers within an agreed time whilst also making sure there is a proper process for any issues that may arise.
As part of the drive to support businesses on the issue of late payment of invoices, the government is advising companies to agree payment terms before delivering orders and make use of Supply Chain Finance schemes. These schemes allow banks to offer loans to firms when an invoice has been approved from the supplier.
Furthermore, David Cameron’s coalition would like to see the raising of complaints being conducted through legal channels.
Fallon comments, ‘Late payment causes real cash flow problems for entrepreneurs. It stops them from growing their business – we need to change the culture.
‘Too many of our biggest companies are ignoring the Prompt Payment Code. My message to them is clear- make prompt payment a priority or face the consequences of being named.’
In its current guise, some 1,182 companies are signed up to the Code. However, of this contingent, only 27 are FTSE 100 companies while FTSE 250 businesses are contributing a mere five signatures.
Phil Orford, chief executive of the Forum of Private Business, says that late payment can lead it a ‘domino effect’ right down the supply chain.
‘It decimates cash flow and forces many firms into administration – so it is important that we do whatever it takes to reverse this trend and set in motion a culture of prompt payment for small businesses and the economy as a whole,’ Orford adds.
A debate on prompt payment issues will be taking place in Parliament today (8 November).
Businesses wishing to sign up to the Prompt Payment Code can do so here.