New code aims to deal with the damage of late bill payments
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Cashflow is king – it's a warning every business knows, and yet late payment is a damaging problem the majority of businesses have come up against.
But new recommendations from the Association of Accounting Technicians (AAT), backed by leading backbenchers in a cross-party pressure group, are hoping to change that.
The AAT has recommended that the currently voluntary Prompt Payment Code be made compulsory to all businesses over 250 staff.
The code, administered by the Institute of Credit Management, aims to increase the amount of suppliers paid on time and promote good practise.
The AAT also suggests that the current legal payment terms should be halved from a maximum of 60 days to 30 days, and that a financial penalty scheme be put in place to apprehend consistently late payers, enforced by the Small Business Commissioner.
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Andrew Mower, the Federation of Small Business' development manager in East Anglia, said: 'Poor payment practices are seen as the top business risk for many small suppliers and cause thousands of businesses to close every year.
'Our research has shown that around a third of payments to small businesses are late and that this resulted in cash flow difficulties for nearly one in four of these firms.'
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He added: 'The voluntary Prompt Payment Code is not working when it allows signatories to pay on terms of over 120 days, so we want to see a new tough and transparent compliance regime.'
'We also think that the government should introduce a requirement for big businesses to appoint a non-executive director on boards, with a specific responsibility for good supply chain practice, including improving payment practices.'
Pete Hart, co-owner of Chapmans cards and gifts in Southwold, said: 'We have had problems with late payment, but it actually tends to be with smaller businesses which just have one person trying to keep on top of everything.
'But we do tend to find by and large other Norfolk businesses are extremely conscientious when it comes to paying on time, because they know how important cash flow is to us.
'We supply papers to Adnams beer and a school nearby, and both are particularly prompt with payment.'