Payment practices: it pays to be prompt

For businesses large and small, being paid on time matters. Reliable cashflow allows companies in all sectors to plan effectively, pay staff and invest in the future. Paying quickly and fairly is at the heart of good supply chain relationships, too, building trust between businesses. For the CBI, it is not just behaving the right way – it makes good business sense – as we outlined in a joint article with the FSB recently.

Read the CBI and FSB’s recent Red Box article on prompt payments

But late payment can still be an issue for too many companies. To tackle this, government has been stepping up its scrutiny of company payment practices through a range of new policy.

In April 2017, the Payment Practices and Performance Reporting (PPPR) regulation came into law, requiring businesses meeting two of the qualifying criteria (250+ staff, £36m+ turnover, £18m+ assets) to report data on their payment performance – standard payment terms and how often these are met, as well as information about invoice and supply chain practices.

This is now no longer ‘for information only’. From September 2019, public sector bodies will start acting on this data, reviewing companies’ payment data when deciding which companies are awarded contracts to deliver public services, infrastructure or buildings. While this particularly impacts direct suppliers to government, any business in a public sector supply chain should start taking note.

The CBI has been working with government departments including Cabinet Office and Department for Business, Energy and Industrial Strategy, as well as the Labour Party, through consultations and roundtables with business.  We’ve been urging policymakers to consider the dynamics of the UK’s different markets, ensure that new policy is flexible so that businesses can champion good practice, and encouraging large firms to explore faster payment arrangements for SMEs.

As payment performance improves, the CBI will also continue to voice member concerns, lobbying government on the conditions in different sectors affecting payment and work with departments to evolve policy so that it benefits businesses large and small.

For more information please contact [email protected]