A BBC investigation has confirmed what many UK small business owners have been saying for a long time now – the measures to prevent late payment are simply not working.
In 2008 the government established the Prompt Payment Code in order to ensure that small businesses get the money they are entitled to, often owed by much larger companies. Lack of cashflow can be disastrous for small businesses and that is why the code was put in place.
It is estimated that over £30 billion is owed to small companies by bigger firms. Around 1,500 firms have signed up to the code (a number are FTSE 100 companies) that pledges they will abide to the originally agreed upon terms of payment, rather than retrospectively amending them. Despite signing, some companies still manage to stretch their payment terms up to 120 days with no recourse for the supplier.
The biggest problem with these firms not paying their suppliers on time is that those suppliers in turn will be unable to pay their suppliers. Prime Minister David Cameron has already responded to the findings and promised a full consultation to see what can be done.
But it probably isn’t a good idea to get your hopes up that the status quo will change any time soon.