Prompt Payment to Suppliers
The GBC requires businesses to commit to pay 95% of their suppliers on time, within at most 60 days, including paying small suppliers (<50 employees) within 30 days unless otherwise mutually agreed (and not unilaterally imposed or signed under duress by them).
Previously, the Good Business Charter required organisations with more than 50 employees to sign the government’s Prompt Payment Code. This is now the Fair Payment Code which has a bronze, silver and gold rating. The focus for the GBC on this component is paying small suppliers within 30 days and all suppliers within 60 days, in line with the Silver level of the Fair Payment Code.
Other aspects of the Code such as clear and easily accessible guidance on payment procedures and an adequate system to deal with complaints and disputes are expected to be implemented as part of ensuring the commitment of prompt payment is met.
Why Prompt Payment to Suppliers Matters
Every year small businesses go out of business because they are not paid on time. They can be bullied into having to accept long payment terms or suddenly subject to monies being withheld.
Paying promptly is a matter of respect – simply doing for others what you would also like to happen to you. Too often it is seen as an operational issue – but should be something boards address and are aware of as part of being socially responsible. It shows respect to your suppliers and treats them as you would wish to be treated. On a very practical note, it also increases your resilience and builds up goodwill with your suppliers who are also likely to come to you first with any loyalty offers and be more understanding if you experience any difficulties.
Sobering stats on late payment
Prompt payment matters!
Good Business Charter accredited, Clive Owen LLP, recognised as one of the first Fair Payment Code awardees
Bellevue Law: Prompt payment - a fundamental of good business
