Late payment code to help small businesses

Aug 17 2009 by Karen Dent, The Journal

EFFORTS are being stepped up to stop small firms going out of business because of late payments.

The North East had the lowest number of firms failing because of the issue last year but 137 were still forced out of business because they were not paid in time, costing them £19m in unnecessary interest payments. Nationally, late payments cause one in four businesses to become insolvent, resulting in 4,000 failed companies and overdue payments costing businesses £180m in interest.

The Government has now put together a Prompt Payment Code in partnership with the Institute of Credit Management (ICM) as part of a number of initiatives focusing on the issue and particularly small businesses.

All companies signing up to the code must pay suppliers within a time set out in their contract and agree to take part in a dispute settling process if there is a payment disagreement.

Joe McLean, partner at Grant Thornton’s financial advisors’ Newcastle office, said: “Late payment is now the biggest cash flow concern reported by business.

“Cash is the lifeblood of a business. At a time when credit is being squeezed and banking facilities are a precious resource, late payment by customers can be the straw that breaks the camel’s back.

The Prompt Payment Code and national guidelines can be downloaded at www.promptpaymentcode.org.uk.