Can Prompt Payment Code help SMEs?

Can Prompt Payment Code help SMEs?

Everyone hates being paid late, but when your business depends on timely payments, it can be downright unbearable.

Late payment to construction firms has been named as one of the top issues stifling the industry’s growth, according to a report by Bibby Financial Services (BFS). The Planning for Growth report saw 53% of SMEs citing the issue as a key challenge.

Helen Wheeler, Managing Director of Construction Finance at BFS, said the issue of late payment may threaten the survival of many SME companies: “Issues associated with late payment continue to hinder the growth of thousands of small construction businesses every year, despite government efforts to improve the situation. This has a huge impact throughout the entire supply-chain and will undoubtedly affect the performance of the construction sector this year.”

“Can PPC help SME's? ”

The Prompt Payment Code, one of the Government's measures to help SMEs, seeks to set out principles for businesses to follow when dealing with and paying their suppliers. More than 1,700 businesses and public authorities had committed to these principles by October 2014, and more are looking to become signatories in the Code, meaning they will uphold the principles of the Code.

In short, the signatories agree to:
• Pay their suppliers within the terms agreed at the outset of the contract
• without attempting to change payment terms retrospectively
• without changing practice on length of payment for smaller companies on unreasonable grounds

There are obvious benefits to joining the Code signatories: If companies pay promptly, it's a tangible benefit to their suppliers and to them, as they could benefit by receiving more favourable pricing or service which could make them more competitive. Companies can also use the PPC logo on their documentation and website to show they are serious about good payment practice, which can also lead to receiving more business.

More and more companies are signing to agree to follow the Code – which can only mean that the construction industry which is clawing its way back to pre-recession figures can now choose which suppliers it does business with. This can be especially important to SMEs, whose whole business sometimes hangs in the balance.

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