New fair payment code ‘to ease late payment strain’ on SMEs

Small businesses are facing increasing financial strain from unpaid invoices and delayed payments, contributing to a rise in insolvencies. In 2023, over 25,000 small businesses went insolvent, the highest in 30 years. To combat this, the new Fair Payment Code, an update to the 2008 Prompt Payment Code, introduces a set of fair payment standards designed to encourage faster payments.

The code offers three award categories based on payment timelines: Gold for paying 95% of suppliers within 30 days, Silver for paying 95% of small suppliers within 30 days and others within 60 days, and Bronze for paying 95% of suppliers within 60 days. These categories aim to motivate businesses to adopt quicker payment practices, particularly for small suppliers who often struggle with late payments.

The Fair Payment Code is seen as a vital step in alleviating financial pressure on small businesses, many of which are battling high inflation, taxes, and rising costs. The code also supports businesses in improving their payment practices over time, offering a pathway to higher award categories as they meet these new standards. By incentivising timely payments, the initiative hopes to boost cash flow and help small businesses stay afloat.