NEWS / ACE News / Progress on Payment Culture

ACE News

03 FEB 2021


We analyse the changes to the prompt Payment Code, and what they mean for your business

ACE has long-campaigned around poor payment culture in the UK, engaging various Government departments on behalf of members. The problem is acute with more than £23.4 billion of late invoices currently owed to firms in all industries across Britain. This obviously impacts on cash flow, but in difficult economic circumstances such as the ones we’re currently living through, it can mean the difference between survival or closure.

To help tackle the problem, the Prompt Payment Code (PPC) was created in 2008. It established a set of principles for businesses when dealing with and paying their suppliers that commit them to paying on time and fairly. Since its launch nearly 3,000 companies have voluntarily signed the Code.

Despite this, poor payment practices are still rife, with our sector especially impacted. Last week the Government announced a series of measures to beef-up the Code, including the requirement for signatories to pay 95% of invoices within 30 days.

  • Requiring a company’s CEO or Finance Director, or the business owner where it is a small business, to personally sign the Code to ensure responsibility for payment practices is taken at the highest level of an organisation.

  • Introducing a new logo for signatories to use in external communications to show their commitment to the Code, making it more damaging to a company’s reputation to breach it.

  • Acknowledgement as a condition of signing the Code that suppliers can charge interest on late invoices.

  • Enabling administrators of the Code to investigate breaches based on third-party information.

  • New requirement for signatories to pay 95% of invoices from small businesses (those with less than 50 employees) within 30 days will be effective from 1 July 2021. The target for larger businesses will remain 95% of invoices within 60 days.

ACE’s Legal & Commercial chair, Margot Day (Buro Happold) commented: “For ACE’s SMEs the changes will be welcome. It’s not an exaggeration to say for some businesses operating in difficult circumstances that outstanding invoices can mean the difference between remaining open or closing for good. These changes are long-overdue and will hopefully help to nurture a new, more responsible payment culture."

“For larger firms who are signatories of the Code, it outlines a series of new measures that they need to be aware of – a 30-day payment requirement for SMEs and the introduction of interest on outstanding invoices, for example. Those who fall foul of the new requirements will be struck off the Code for poor practice and this is publicly announced by the Small Business Commissioner’s Office."

"The code is still voluntary, but the companies that choose to sign-up are making a very public demonstration of ethical business practices, whilst supporting a post-pandemic business recovery.”

The Government has also shared that it is seeking to strengthen the powers of the Small Business Commissioner (SBC) to ensure larger companies pay their smaller partners on time. New powers proposed in a recently closed consultation include legally binding payment orders, launching investigations and levying fines.

ACE will continue to engage and monitor the situation on behalf of its members and work with all stakeholders to nurture a more responsible payment culture.