The government has announced changes to its Prompt Payment Code (PPC) in an attempt to reduce late payments to small firms that are struggling during the latest lockdown.
These changes will require those larger companies that originally signed up for the PPC to pay all outstanding invoices to these firms within a maximum period of 30 days – rather than the 60-day period they had before. This is to try to ensure the survival of smaller firms in the current situation, with invoices adding up to £23.4 billion currently unpaid across the country.
For small firms in particular, these unpaid invoices can seriously impact on their cash flow – and thus their ability to keep trading. However, while the reforms to the PPC will be welcomed, there is no guarantee that they will be adhered to. Close to 3,000 businesses are signed up to it, but many consistently failed to meet the previous 60-day deadline for payments.
The government hopes to avoid that this time by getting CEOs, Finance Directors and owners to sign and accept direct responsibility. Small firms will be able to add interest charges when invoices are paid late and firms that have committed to the PPC but constantly fail to meet the deadlines will be investigated.
It is to be hoped that these measures will work, as, while a small business accountant from South Yorkshire or any other region can help smaller firms improve their cash flow situation, late payments unquestionably put such firms at risk through no fault of their own.