The Prompt Payment Code (‘the Code’) has been reconditioned to adapt to today’s requirements to uplift small businesses in aid of local businesses withstanding the consequences of the Covid-19 pandemic. On 19 January 2021, the government released the reforms to the Code that would impact all the companies enlisted in the Code. The purpose of the Code is to promote the positive and proactive payment of invoices by larger corporations to their smaller counterpart who often are given minimal thought.
The Code currently holds approximately three thousand signatories, however, prior to the reforms being implemented, these members were not held to a high standard of accountability. The impact on small businesses whose reality is the very possibility of temporary or permanent closure has been intended to be addressed by the changes to the Code and by doing so further supporting the survival rate of small and local businesses.
Small businesses already face increasing pressures, however, are more so limited by having outstanding invoices. Unlike large corporations who are likely to have a multitude of investors and disposable assets to hand, small businesses typically rely on the income retrieved from every supply they fulfil. The potential limitations and devastating impact a token amount of unpaid invoices for small businesses may result in preventing investments, intruding on potential loans, and restraining the employment market.
The Code, focused primarily on the payment of invoices of suppliers, recognises the right of the small businesses to charge interest on late payments by relying on the Code. A significant reform of the Code reduced the requirement for payments to be made within 30 days of an invoice amounting to half the previous requisite. A further amendment came in the requirement of a company’s Chief Executive Officer, or Finance Director, to personally sign the Code to place accountability on the leading parties of a business.
With the aim of further assisting the small businesses, the government granted further powers to the Small Business Commissioner to reprimand large businesses for their failure to settle invoices within the appropriate timeframe. The new powers include the ability to investigate breaches to the Code, issue fines, and obtaining legally binding payment orders.
For further information on this topic or on any other legal area, please contact John Szepietowski or Kay Stewart at Audley Chaucer Solicitors on 01372 303444 or email firstname.lastname@example.org or visit our Linkedin page.
This information was correct as of September 2021