Is the Prompt Payment Code Continuing to Fail SMEs?

Is the Prompt Payment Code Continuing to Fail SMEs?

Many big businesses persistently fail to pay their suppliers on time, putting SMEs under considerable financial pressure.

The UK Government has issued guidance for payment, and introduced a Prompt Payment Code (PPC) in 2015.

The idea is that those businesses signing up to the code voluntarily agree to pay 95% of outstanding invoices within 60 days of them being submitted.

However, as Paul Daine of Premium Collections points out, late payment continues to be a problem for many SMEs.


Why Does 90 Days Hurt?

“One estimate from BACS puts the amount owed to UK SMEs collectively at over £26 billion in overdue payments. Many companies still routinely pay their suppliers and subcontractors in 90 days.”


“For bigger companies, extending terms to 90 days is like using suppliers or subcontractors much like a bank, but without the penalty of overdraft fees”

Paul Daine, Premium Collections


“They are able to use their size to leverage getting services, supplies and support but effectively deferring payment.”

For SMEs, cash flow is the key to survival, and 90 days can end up stretching them to breaking point.

“Many are forced to operate in the red, with a negative cash flow. It’s creating a poor payments crisis, and one which damages the wider economy. SMEs who find themselves constrained by cash flow cannot generate the new business, or provide the new opportunities they’d like.”


Know Your Customer

The Prompt Payment Code, in its current form, does not appear to adequately address the issue of late payment.

“The idea of the PPC was for those signing up to it to work towards making 30 days’ payment terms their norm. There are no clear signs of this change happening.”

There are new rules, in place since April 2017, which mean all large companies in the UK must publish specific information about their payment policies, their practices and their performance when it comes to payment.

“One of the basic things any SME needs to do before doing business is to get to know as much about their prospective customer as possible, as a way of protecting themselves.”

Such measures can include:

  • Obtaining references from other suppliers
  • Checking that order details match what information is available
  • Checking their credit status

“This is an essential first step in the process of taking on work or agreeing to become a supplier.”


Your Own Payment Terms

“Without agreed terms, how do you prove late payment? Set out your payment terms in advance, in writing.”

With late payment, from larger companies especially, payment terms may not guarantee getting paid on time, but they are another form of self-protection.


“Get things right from the start. Put measures in place that will at least reduce the likelihood of payment problems occurring further down the line”

Paul Daine, Premium Collections


“Where SMEs continue to face the challenges of late payment, they should also consider obtaining external help through the services of a collections agency,” Paul concludes.  “People tend to see debt collection as an extreme measure, but it’s a very practical one.”

To discover how commercial debt recovery can help to alleviate the pressures, from restricted cash flow, please call Premium Collections on 0161 962 4695 or visit


Premium Collections has developed a report with Business Aspects Magazine, Credit Management, Cash Flow and Getting Paid.

Discover more about the report or get your free copy, here.
Cash flow and getting paid