All About The Prompt Payment Code
And why it matters …
When it comes to customers paying invoices, and having to deal with spiralling costs, it’s no surprise that the survival of at least 400,000 small businesses is in doubt …
Every small business likes to work with larger customers. There’s good money to be made working for them, however, historically, their payment terms have been anything up to 90-days, and sometimes even longer.
Over the years, many businesses have failed whilst waiting for large invoices to be paid by customers, especially when their own suppliers refuse to offer longer credit times or increased limits. Add in high inflation and other spiralling costs and you can see why this is becoming a major problem.
The Federation of Small Businesses is seeing the number of members shrinking almost daily. They worry that over 400,000 small businesses are at risk unless something is done to support them. 30% of their members said recently that they were having problems getting their larger customers to pay them within the term they agreed.
Of course, the pandemic has to take a lot of the blame, and I guess for those who import and export, Brexit does too. There is strong pessimism in the retail and hospitality industries after all the lockdowns and this is spreading to other sectors as the costs of fuel and utilities rise dramatically.
In the next financial year, National Insurance contributions climb, as do dividend taxation, business rates and the national living wage. Put all this together and it is a challenging time for any small business.
But it is late payments that have been destroying many thousands of small businesses across the country. I feel that if the Government is serious about levelling up, it needs to be focused on helping the business community.
Increasing the small business rates relief to £25,000 would help a lot of firms, but if larger businesses paid smaller businesses within 30-day terms, I think that would make a real difference.
The Government says it is trying to help with the Prompt Payment Code and the Small Business Commissioner is consulting on new powers of fines and penalties for late payers. So, we should all try our hardest to pay our suppliers within the agreed terms.
The Small Business Commissioner says, “Speed and certainty of payment and stable cashflow are essential for all businesses to flourish and grow.” As an accountant and a small business owner myself, I wholeheartedly agree.
You can learn more about the Prompt Payment Code by clicking here.
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