Regardless of the industry that you work in, if you’re a small or medium sized business owner, you’ve probably faced the stress of late payments, many of which come from larger businesses. Luckily, the government has recently announced new measures to combat late payments and it’s set to be hugely beneficial for SMEs.
What is the Fair Payment Code?
The Fair Payment Code is a mandatory payment reporting requirement for large companies, which go alongside strict enforcement measures for late payments. It replaces the Prompt Payment Code (PPC), which first came into effect in 2008, and puts a larger focus on personal responsibility, faster payments and enforcement. Businesses that showcase good payment practices and fair payment standards will be rewarded, with gold, silver and bronze statuses all being up for grabs, and enforcement can be taken if businesses fall short.
By requiring large businesses to be transparent about how they handle payments in annual reports, and rewarding those who are responsible when it comes to paying suppliers and other businesses, it’s hoped that the Fair Payment Code will encourage businesses to prioritise making payments on time and reduce business debts.
What Makes the Fair Payment Code Different?
- It Encourages Faster Payments – The Fair Payment Code requires businesses to pay 95% of invoices from small businesses within 30 days, which is twice as quick as what’s set out in the PPC. This encourages faster payments and reduces the chances of late payments being made to small businesses.
- It Rewards Businesses – Under the Fair Payment Code, businesses with good payment standards will be rewarded, receiving either gold, silver or bronze status for their performance. This encourages businesses to make faster payments, and rewards those that do.
- It Holds People Personally Responsible – Business owners, CEOs and finance directors are all held personally responsible under the Fair Payment Code. They have to sign the code, acknowledge their responsibility over payments and ensure the business adheres to best payment practices.
- It Puts Enforcement Measures in Place – The Fair Payment Code will also put enforcement measures into action, ensuring that businesses adhere to regulations that require large businesses to report their payment performance. Businesses that don’t comply could face fines and legal action, which can be costly.
Though there are always going to be businesses delaying payments, or failing to make payments altogether, it’s hoped the Fair Payment Code will reduce how often this happens, reducing the number of SMEs left out of pocket.
How Can Debt Collection Agencies Help?
Even with the Fair Payment Code in place, SMEs are still going to face late payments and debtors. But, with a reliable and experienced debt collection agency on hand to help, recovering these payments is a lot easier. Not only do debtors tend to take payments more seriously when debt collection experts are chasing them, but handing everything over to the professionals gives you more time to focus on running a business.
Get in touch with the Cobra Financial team to find out more.
