NEWSFOCUS
Time to pay up
pressure on smaller businesses. John Walker, national chairman of the Federation of Small Businesses, said: “It is great news that so many of the biggest companies have signed up to the Prompt Payment Code and we would urge others to follow suit. Big businesses have financial buffers that a smaller firm doesn’t have and so they must be encouraged to pay on time.”
Alan Wilkinson, senior franchise development consultant at The Franchising Centre, also thinks this is good news for franchisees – many of which will be operating SMEs. He said: “Cashflow is vital for small businesses, particularly in the early days. Big business policy of paying in 60 or even 90 days can prevent smaller businesses from pitching for contracts, which could otherwise be lucrative for both parties. I therefore welcome the emphasis being put on encouraging companies to sign up to the Prompt Payment Code. This can only have a positive effect on franchised businesses in the UK.”
Companies commit support after government urges suppliers be paid on time to help ease pressure on SMEs, plus Funding for Lending extension
T
hree quarters of FTSE 100 companies have now signed up to the Prompt Payment Code – an initiative set up by the government in 2008 to ensure that small
and medium-sized enterprises (SMEs), including franchisees, get paid within a fair time frame.
Since business and enterprise minister Michael Fallon wrote to all businesses in the FTSE 350 back in November last year, urging them to pay suppliers on time or face being named and shamed, an additional 94 companies have also committed their support. By agreeing to the code, businesses agree to pay suppliers on time and within the terms agreed at the outset of the contract.
In an interview with the Sunday Telegraph Mr Fallon said: “Large companies are sitting on an awful lot of cash at the
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www.franchisornews.co.uk “
Cashflow is vital for small businesses, particularly in the early days
moment and it is simply not fair if they don’t pay their suppliers or sub-contractors on time. That is why I have urged the largest companies to sign up to the Prompt Payment Code, which is now five years old.” In 2011 Franchisor News reported that 30 per cent of small business said late payments were still a problem despite the code’s introduction. At around the same time, 38 per cent of the Federation of Small Businesses members who were paid late in turn paid their suppliers late, resulting in a vicious cycle and ultimately financial
”
In a bid to further support SMEs, the government has recently announced that it will be extending the Funding for Lending Scheme (FLS) until 2015. It is hoped that this will increase the incentive for banks to lend to SMEs, both this year and next. Tracy Ewen, managing director of IFG Invoice Finance, says this is a step in the right direction but the government will need to do more to ensure long-term success for smaller businesses. She added: “The government’s Funding for Lending Scheme has now been extended to 2015, which is a strong indicator of its positive intent and support. However, so far the scheme has had little impact on the criteria that banks so rigidly stick to when lending to SMEs, and the extension has not changed this. “Many struggling businesses can’t access these new lower rates, and still will not be able to going into 2015. It is important that SMEs start looking to alternative sources of funding, such as invoice finance, where they can obtain tailored advice and funding to help them grow. “Certainly this is a step in the right direction, but if growing SMEs are going to contribute to improvements in the economy and aid a move out of the recession, the government needs to do more to ensure their long-term success.” n
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