On Monday, the government announced it was strengthening the Prompt Payment Code (PPC), mandating that its signatories must pay suppliers within 30 days, rather than the previous 60.
While this is a welcome step in the right direction, there is still a long way to go in addressing the chronic issue of slow payments. A 30-day payment period is still 30 days too long for many small businesses struggling to stay afloat.
What’s more, PPC registration is still voluntary and, while signatories should be applauded for their part in voluntarily adhering to standards of prompt payment, there is no substantive measure that demands the wider business community pay suppliers quickly.
There needs to be a cultural shift in mindset towards the faster payment of suppliers. When suppliers are paid quickly, the whole supply chain benefits.
Only last week, research from the Institute of Directors showed that the pandemic has exacerbated a longstanding payment problem for British businesses, with two in five facing an increase in overdue commercial debts. This will likely only get worse and represents the tip of the iceberg when it comes to slow payments.
The measures introduced thus far to tackle slow payments either do not go far enough, or are not effective. In reality, it is a mixture of both. Government-led initiatives such as CBILs – while commendable – are short-term solutions to a chronic problem that predates the pandemic. What’s more, pumping more liquidity to small businesses that will create a mounting wall of debt seems counterproductive when often, they could be saved just by being paid what they are owed, in good time.
We hope to see more companies improve their payment practices and we applaud this step from the government in shortening payment times. But, technology is available now that, if employed at scale, would make initiatives such as the PPC redundant and make slow payments a thing of the past. Corporates have the ability to pay suppliers – even the very smallest – instantaneously without having to impact their finances. Machine learning makes it possible for SME’s to be paid on Day -1.