The government introduced the Small Business, Enterprise and Employment Act in March 2015. It is a wide-reaching piece of legislation with the aim “to make the UK the best place in the world to start and grow a business”. The legislation covers everything from tied pub tenants to zero hour contracts, but one of the most significant components of the act is the Prompt Payment Code.
The Prompt Payment Code, which came into effect in April this year, is the government’s attempt to combat the problem of late payments from buyers to suppliers, a problem which forces 50,000 UK businesses a year to close, according to the Federation of Small Business. The act aims to increase transparency and focus on payment practices through a tough new reporting requirement on large British companies.
Large companies and large limited liability partnerships (LLPs) will be required to publish information about their payment practices and performance on a government approved web service twice per financial year. The first round of reporting is due at the end of this month (September, 2017) for those companies with a financial year end in March.
Those companies with poor payment practices will be exposed, making payment behavior a boardroom reputational issue and forcing them to improve. Equally, small businesses will be empowered to use the data to negotiate fairer terms, challenge late payments and make informed decisions about who to trade with.