How the payment code just encourages companies to pay suppliers on time

Not small business likes back payments. In addition to creating a hole in its cash flow, it is a headache to chase customers who pay slowly until the money arrives.

The new Fair Payment Code of the Government aims to end the culture of backward payments in the United Kingdom. This will help small and medium enterprises (SME) to release effective to cover costs, reduce loans and invest for growth.

Fulfilling this voluntary code could help your business improve your reputation and confidence with your suppliers, and be more efficient in reducing the effort of collections.

However, it is possible that some changes must make to ensure that your business meets the new standards.

This article is immersed in the fair payment code and what could mean for your business. It retains SME reactions and business agencies, and offers advice on how to promote timely collections and improve their own payment practices.

This is what we cover:

What is the fair payment code?

The fair payment code, launched on December 3, 2024, establishes higher expectations in the payment practices than the fast payment code, which replaces.

Encourages companies from the United Kingdom to pay their invoices within certain time limits.

There are three awards categories: gold, silver and bronze.

If you pay at least 95% of your invoices inside:

• 30 days, you will receive the code Gold Prize
• 60 days and 30 days for companies with less than 50 employees, will qualify for your Silver Prize
• 60 days, you will achieve the Bronze Prize

You can register in the new code and request one of the awards On the Small Business Comissioner website.

Note: Any company awarded a fair payment code award must be clear, fair and collaborative with its suppliers. You also have to re -apply every two years to stay in the scheme.

In addition to the fair payment code, the government will increase transparency by Increased report tasks in large companies to include their total sum of payments, and the percentage not paid within the agreed terms.

In addition, it plans to expand the powers of the Commissioner of Small Business around the investigating criminals, for example.

Why address back payments?

The scourge of late payments is getting worse.

The companies that report the average payment times for 80 days have increased by 20% since August 2023, according to The research carried out by good businesses pays.

Waiting back payments means that you can have to:

• Use cash reservations to pay your business costs
• I spent a valuable time calling customers to ask if they have received their invoices, and approved them and entered for the next payment.

Backward payments can even lead to Thousands of SMEs go bankrupt every yearaccording to the Federation of Small Businesses (FSB).

Addressing these problems improving the culture of payments could keep these businesses underway and boost the United Kingdom economy in £ 2.5 billion, the government said.

Reactions to the Fair Payment Code

Critics say that the criteria of 60 days of the bronze award are much longer than the 30 standard days that most companies expect. But if a company has a silver or gold award, that should be a sign of best payment practices.

Catherine Heinen, Taxassist’s technical content writer, says: “The fair payment code encourages companies to pay suppliers on time, [helping their suppliers] access financing and investment, and make long -term decisions, such as committing to large disbursements to allow growth.

“SMEs can do more business with large companies if you can trust those with a fair payment code prize.”

Tina McKenzie, president of FSB policies, says: “FPC is an important element of [the Government’s] Backward payments package that should transform payment practices.

“It is for the United Kingdom companies that deserve recognition for doing the right thing. The code is a great improvement in the rapid payment code and establishes a clear reference point for responsible payment practices at its gold level.

“Establishing a 30 -day goal simplifies the problem. However, many pay faster and we also celebrate them. ”

Edwin Barnes, founder of the Audiovisual Company Moorhen Media, says: “I do not think we have a single client that qualifies for the golden prize, so this could promote a faster payment.

“However, [late payments] They are often reduced to long -standing operational problems and I am not sure that this provides the impetus to solve them. There must be an “name and example” approach, as well as the reports of the gender wage gap.

“If SMEs can trust fast payment, they are empowered to work with more new customers, assume larger jobs and invest more in the tools they need to grow and offer a higher quality service.”

Edwin also encouraged other SMEs to register in the code to avoid cash flow problems to obtain supply chains.

The work of Good Business Pays suggests that a name and meaning approach can be effective.

Since he appointed 110 late payment companies in series in August 2023, 19 of them have improved their payment culture and no longer appear on the list.

How to adjust your payment processes

Requesting a fair payment code award can improve the reputation of your business, and you can use the prize and logo on its websites and emails to attract new customers, says Catherine.

To access a higher prize, you may have to adjust your payment practices, including training and employee controls.

The two -year cycle means that you will need to keep your team and processes a day to continue complying with the award criteria.

You must also ensure your own cash flow to ensure that you can comply with the criteria to pay 95% of suppliers in time, Catherine adds.

Ensure that it is clear, fair and collaborative with suppliers may require adjustment of their payment processes.

For example, Edwin says that providing clarity includes:

• Give consistent instructions to send invoices
• Receipt confirmation
• Communicate contact data to pursue back payments.

“Too too often, we have to chase our main contact with the client, who is later loaded with finding who will happen to us,” says Edwin.

“This wasted time and can sour customer relationships, particularly when we have to repeatedly pursue.

“In contrast, our best client for payments recently began to confirm the reception of each invoice and communicate when it has been admitted for payment.

“We haven’t had to pursue an invoice from them since then.”

To comply with the criteria of the fair payment code, write your own terms of payment to align with your objective prize, ensuring that they are clear and consistent.

The FSB also recommends communicating openly about its payment practices with customers and suppliers, which can help build relationships.

Integrated payment solutions and accounting software can also significantly improve your payment time to suppliers.

Foster more timely payments

In addition to doing business with fair payment code signatories, there are many ways to promote faster payments.

These range from the check of the payment times of their existing or potential customers in A good business paysand avoiding Serial series Payersto use psychological techniques when pursuing invoices.

A round table event directed by the ZaweA professional agency for public accountants, said SMEs are often too anxious to win business and not negotiate or carefully verify the terms of the contract. He recommended that companies work to improve their payment negotiations and establish clear terms around deposits and deadlines, before accepting contracts.

Edwin says: “A way in which we increase customer payments in time is to maintain an updated list about how each client hopes to receive invoices and where to send them.

“We try to make sure that the client confirms the receipt quickly and we make sure that the number of PO is on the bill and email, which makes it so easy to find later.”

Technology such as electronic nap can also help you receive the fastest payment by rationalizing your processes and eliminating delays and errors sometimes associated with paper or PDF documents.

58% of ICAEW Business Trust Monitor respondents use electronic investment and half say that payment times have improved.

Final thoughts

It is likely to come from the government’s late payment package, so observe this space.

But many believe that the fair payment code is an encouraging start.

“For those at the receiving end of bad payment practices, the FPC provides a framework to better demand,” says Tina in the FSB.

“We need to change the culture in which it is acceptable to pay small businesses late. We hope this is a turning point. “

Meanwhile, registering in the code could significantly increase the reputation of your company.

And taking proactive measures to encourage faster payments of customers can make a big difference in their cash and growth potential flow.