The Government has strengthened the prompt-payment code so that 95% of invoices from smaller suppliers must be paid within 30 days from 1 July 2021.
This has been halved from the current 60 days, although this remains the target to pay invoices from larger suppliers – defined as those with 50 or more employees.
Directors, finance officers and chief executives will also need to personally sign the code to ensure they are accountable for making prompt payments.
Around 3,000 companies have signed up to the voluntary code, but more than £23.4 billion-worth of late payments are owed to smaller businesses in the UK.
Paul Scully, small business minister, said:
“We are relieving some of the pressure on small business owners by introducing significant reforms to the UK payments regime — pushing big businesses to pay their suppliers on time.”
Late payments are nothing new for smaller businesses, but the COVID-19 pandemic and various lockdown restrictions have exacerbated the situation for many.
Mike Cherry, chair at the Federation of Small Businesses, said:
“Sadly, some unscrupulous corporations are trying to inoculate themselves from the impacts of COVID-19 by withholding payments, or even freezing them at the expense of small firms.
“Cash is still very much king for small firms, and withholding it has pushed many to the brink at a time when they’re at their most vulnerable.
“If the small firms that make up 99% of our business community are to play the fundamental role in ending this recession, this behaviour must stop.
“Ending our pernicious poor payment culture for good over the coming months will be fundamental to turning our hopes of economic recovery into reality.”