IPSE: Prompt Payment Code needs strength

Thursday 30 October 2014

For the Prompt Payment Code to make a real difference in fighting late payment, The Association of Independent Professionals and the Self Employed (IPSE) says that it needs to be strengthened significantly.

The group welcomed the recent announcement from the Department of Business, Innovation and Skills that big businesses will be collaborating with the government to tackle late payment but added that this move must be met with "concrete action".

IPSE has long campaigned for more action to be taken against businesses who do not pay on time, which can be very risky for limited companies, sole traders and other people who are setting up a business. It is one of many groups and freelancers who have tried to draw the government's attention to this.

As a result of this sort of action, the government moved to introduce the Prompt Payment Code, which sets out principles for businesses when it comes to dealing with and paying suppliers. Further to this, it recently announced that a new Advisory Board has been set up with a view to finding ways to enhance the code. Representatives have been gathered from such organisations as Aviva, Fujitsu and Skanska. All the businesses selected for the board were done so based on their reputation for operating good practice with supplier payments.

However, IPSE says that more needs to be done than to simply encourage big businesses to promise not to pay suppliers late.

Director of policy and external affairs at IPSE Simon McVicker said: "We welcome the recent moves by businesses to tackle the scourge of late payment, which is crippling microbusinesses across the UK on a regular basis. However, to truly put an end to the problem we need to see concrete action and statutory measures to change the culture around payment. Big businesses have promised before to address this issue and yet nothing really changes, it persists in damaging the livelihoods of the UK’s self-employed."

His suggestion as to how to strengthen the Prompt Payment Code was this: "Signatories must commit to paying above the legal minimum interest on late payments and publish regular reports on their performance."

Mr McVicker explained that the self employed face a difficult situation of being reliant on payments to keep their business moving but are unable to chase up their clients aggressively for fear of jeopardising future business with them. Indeed, businesses have the right to charge interest to clients when they fail to pay on time but this is a privilege that few adopt as they fear that this may damage their business relationship.

IPSE suggested that the best way to confront this issue is if the government sets up a small business conciliation service, where such disputes can be resolved. Additionally, IPSE said legal action must be more severe against anyone who pays late and the worst offenders should face heavy fines.

Mr McVicker said that payment terms need to be fairer for both businesses and suppliers. He said that 90 day payment terms are not good enough and that no supplier should receive payment more than 30 days after the agreed date.

By Victoria McDonnell

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