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The Minister has written to all FTSE 100 and FTSE 250 companies. The letter urges companies to sign up to the Code, which will be four years…
The Minister has written to all FTSE 100 and FTSE 250 companies. The letter urges companies to sign up to the Code, which will be four years old in December, and warns that the names of any companies that fail to do so will be publicised in the new year.
The Institute of Credit Management’s Code demonstrates a commitment to good practice and signatories are obliged to pay their supplier within an agreed time and to make sure there is a proper process for any issues that may arise.
Business and Enterprise Minister Michael Fallon said:
“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. However, only 27 FTSE 100 companies and five FTSE 250 companies are signatories.
Chief Executive of the Forum of Private Business, Phil Orford said:
“We welcome this initiative to encourage all large companies to sign up to the Prompt Payment Code, pledging to pay their suppliers on time and in full.
“All too often we see a ‘domino effect’ of late payment 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.”
All signatories of the Prompt Payment Code are already publicly available online, but the government wants to be more pro-active in highlighting companies that are not committed to the code.
To support businesses on the issue of late payment of invoices 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. The Prime Minister has already written to FTSE 100 companies to encourage take up of this initiative which could deliver up to as much as £20 billion of new cheaper, finance to their suppliers, including many UK SMEs.
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). It contains valuable lessons from small businesses such as advice on invoicing and developing a well-defined credit policy.
A debate on prompt payment issues will take place in Parliament on Thursday 8 November 2012.
**Notes to editors:
**1. Businesses can sign up to the Prompt Payment Code now at http://www.promptpaymentcode.org.uk/
The letter has been sent to all FTSE 350 companies. However, some are not based in the UK or are financial funds, so are not trading companies.
Independent analysis by Experian suggests that current signatories to the Code represent over 60 per cent of total UK supply chain value.
The government recently announced support for Supply Chain Finance which is a way for large companies to help their supply chain access credit, improve cash-flow and at a much lower cost. With Supply Chain Finance a bank is notified by a large company that an invoice has been approved for payment; the bank is then able to offer a 100 per cent immediate advance to the supplier at lower interest rates, knowing the invoice will be paid. The government is urging more businesses to make use of the initiative and unlock additional finance through the supply chain.
BIS paid 93.6 per cent of invoices within five days in December last year, and averaged 95 per cent across the year.
The Government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries.’ It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
To create the most competitive tax system in the G20
To make the UK the best place in Europe to start, finance and grow a business
To encourage investment and exports as a route to a more balanced economy
To create a more educated workforce that is the most flexible in Europe.
Work is underway across Government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the Government wants the economy to travel.
- BIS’s online newsroom contains the latest press notices and speeches, as well as video and images for download. It also features an up to date list of BIS press office contacts. See http://www.bis.gov.uk/newsroom for more information.
Notes to Editors
Name BIS Press Office Job Title
Division Department for Business, Innovation & Skills Phone
Name Dan Palmer Job Title
Division Department for Business, Innovation and Skills Phone 020 7215 5303 Fax
Published: 8 November 2012