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PPC Regulations: Do They Need to Change?

Late payment is a pervasive problem for many small businesses. The Prompt Payment Code (PPC) is one way that the government is looking to target this issue, making sure big companies aren’t taking advantage of their smaller suppliers. However, though more large companies are signing up, there are some who are finding loopholes to make sure they’re still holding off on payment.

The Forum of Private Business is urging changes to the Prompt Payment Code as some large businesses are signing up but aren’t actually delivering on their promises. Some businesses with payment times as long as 90 days are signing up, with the FPB speaking out in light of Unilever signing up despite this lengthy payment schedule. This obeys the letter of the law but not the spirit – by paying small suppliers on time after 90 days, are you really solving the problem that the Code is setting out to?

Unilever increased its supplier payment times in 2010 from 60 to 90 days. More recently, Sainsburys has increased its payment time for non-food suppliers from 30 to 75 days – and last month the supermarket said it planned to sign the Prompt Payment Code. It’s this type of behaviour that’s undermining the spirit of the Code, even if businesses might be technically acting within the regulations.

The FPB argues that the Code needs to change in order to stop this kind of thing happening, in order to ultimately benefit small businesses more. The FPB Chief Exec commented; ‘We feel big businesses are cynically using the Prompt Payment Code to boast of their ethical credentials to the wider public, when in fact they are anything but to their suppliers. No one in their right mind can think Unilever’s 90-day payment terms are ‘prompt’, so why should they be allowed to sign the Prompt Payment Code. It’s a ridiculous situation which has to stop.’

If your business is struggling with late payment, then invoice finance could help. By releasing the cash flow tied up in unpaid invoices, you can boost your working capital without being kept waiting for customer payment. This is one problem that is tricky to solve as these issues with the PPC shows; get to know your options to get ahead.

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