Business minister Michael Fallon has vowed to help entrepreneurs by threatening big businesses with naming and shaming if they fail to sign up to the Prompt Payment Code.
The voluntary agreement, designed to promote good payment practices, will be four years old next month, but there has been rising concern over the number of large companies which have not signed up to the code.
Fallon has written to all FTSE 100 and FTSE 250 companies urging them to sign up to the Code, warning that any companies that fail to do so will be publicised in the new year.
All signatories of the Prompt Payment Code are already publicly available online, but the government wants to be more proactive in highlighting companies that are not committed to the code.
Fallon said in a press statement: “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. I’m confident that driving up support for the common sense principles in the Code will have a very positive effect.”
Currently 1,182 companies are signed up to the Prompt Payment Code, but only 27 of them are in the FTSE 100 and just five are in the FTSE 250.
Phil Orford, chief executive of the Forum of Private Business, welcomed the news from the minister, adding that he all too often saw the domino effect of late payments resulting in companies falling into administration
"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,” he said.
The government is also advising businesses to:
- Agree payment terms before delivering orders
- Make use of Supply Chain Finance schemes, which allow banks to offer loans to businesses when an invoice has been approved from the supplier
- Raise complaints through legal channels over late payment from Prompt Payment Code signatories and use legislation already in place to help companies pursue late payers and seek the relevant compensation available
- Use electronic invoicing where possible, automating process and adding instant transfer of the invoice and instant verification from the customer that the invoice has been received
- Use Get Paid!, a guide for small businesses which contains tips and advice from both suppliers and customers, that has been published by the Association of Chartered Certified Accountants (ACCA)
A parliamentary debate on the issue has been tabled for 8 November, but is it too little, too late? Let us know your thoughts below.