Ministers redefine “voluntary” in attempt to stem cashflow woes

Money, News

In an attempt to further alleviate the financial strain on a bruised and battered small business community, the coalition is threatening to ‘name and shame’ any members of the FTSE 350 not signed up to the Prompt Payment Code.

To those not up to speed on the code, it’s a ‘voluntary’ agreement which aims is to speed up payment from large corporates to their smaller suppliers. A touch over 1,000 businesses are signed up to the code, but a mere 32 of them members of the FTSE 350.

Armed with the threat of bad PR, Business Minister Michael Fallon is setting out to scare big business into signing up to the code, hopefully making things a little easier on the cash-flow front for freelancers and small businesses.

As we all well know, late payments are the bane of freelancers existence. Recent research by payments firm BACS shed light on the continuing problem, showing that the average UK small business is owed £45,000 in late payments, which, if extrapolated across the small business community, makes a total of £35bn owed.

It’s debatable whether Fallon’s naming and shaming will have any tangible effect, some tighter legislation would probably be more effective, yet his move has been welcomed nonetheless.

Commenting on the subject Phil Orford, CEO of the Forum of Private Business, said:

“All too often we see a domino effect of late payment right down the supply chain. It decimates cash flow and forces many firms into administration, so it is important that we do whatever it takes to reverse this trend and set in motion a culture of prompt payment for small businesses and the economy as a whole.”

Hear, hear Phil. Hear, hear.

Photo by University of Salford