The Fair Payment Code aims to hold larger businesses accountable for how quickly they pay their suppliers. The code introduces a three-tier award system: Gold, Silver and Bronze.
The system recognises businesses based on how quickly they pay invoices, allowing them to demonstrate their commitment to fair payment practices through a tiered reward system.
The Different Tier Levels of the Fair Payment Code
| Gold Award | Businesses that pay at least 95% of all invoices within 30 days |
| Silver Award | Businesses that pay at least 95% of invoices within 60 days, while paying 95% of small business invoices within 30 days |
| Bronze Award | Businesses that pay 95% of invoices within 60 days |
Companies receiving these awards must also commit to being Clear, Fair and Collaborative with their suppliers. Awards are valid for 2 years, after which businesses must reapply to maintain their status.
Reason for the Introduction of the Fair Payment Code
Late payments can cripple small businesses. When invoices go unpaid for weeks or months, cash flow dries up. Small firms struggle to pay their bills, invest in growth or even stay afloat.
According to recent data, 15% of SMEs cited late payments as a significant obstacle in 2023. The Fair Payment Code aims to fix this by promoting transparency and best practices.
How This Will Help Small Businesses
This new system encourages businesses to Pay Faster, Improve Transparency and Drive Growth.
The government has also introduced a complaints system. If a business fails to meet the payment requirements of its award or breaches the principles of the Fair Payment Code, the Small Business Commissioner (OSBC) can receive a report about it.
Effective Date of the Fair Payment Code
The government plans to make reporting payment practices mandatory for large businesses in the coming weeks. This means companies will have to include payment performance in their annual reports. Additionally, consultations are underway to strengthen the enforcement of existing late payment regulations.
Eligible businesses can already begin applying for the Fair Payment Code. The government expects this initiative to be fully operational in the near future.
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This article is for general informational purposes only and does not constitute legal or financial advice. While we aim to keep our content up to date and accurate, UK laws and regulations are subject to change. Please speak to a professional for advice tailored to your individual circumstances. Pi Credit Management accepts no responsibility for any issues arising from reliance on the information provided.