FOCUS PROMPT PAYMENT CODE
By Professor Rudi Klein SEC Group CEO and Barrister
T
he Prompt Payment Code (PPC) is operated by the Chartered Institute of Credit Management on behalf of the Department for Business in London (BEIS). There is a
commitment in the PPC that says its signatories must pay 95% of all invoices within 60 days. It is now more than ten years old and, after all this time, it has suddenly come to life. Why, one might ask, didn’t the Chartered Institute or UK Government take such action years ago? In July 2017, Carillion signed up to the PPC while taking upwards of 120 days to pay its supply chain. At that time, it seemed to be acceptable to take as long as one wanted to discharge payment provided it was made on time (in Carillion’s case, on the 120th day).
Who has been kicked off and suspended? The first tranche of disciplinary action happened in April, when eight large construction businesses were among 17 firms either suspended or removed from the PPC.
Suspended companies were required to produce action plans to demonstrate that they would change their ways by ensuring invoices would be discharged within 60 days. In July, 18 more firms were penalised for late payment, including construction companies Ferrovial Agroman, Galliford Try and Alun Griffiths, a large Welsh- based company.
Choc horror
Te Prompt Payment Code was meant to improve all-important cashflow for businesses. But after the suspension and removal of several high- profile signatories, Rudi Klein says it’s been about as useful as a chocolate hot water bottle
Payment reporting regulations The Reporting on Payment Practices and Performance Regulations 2017 now impose a statutory duty on large companies to report publicly on their payment policies and practices. Large companies are those that have
exceeded two of the following three thresholds in their last two preceding financial years: ●●£36 million annual turnover ●●£18 million balance sheet total ●●250 employees.
These regulations apply to financial years beginning on or after 6 April 2017.
“Why, one might ask, didn’t the Chartered Institute or UK Government take such action years ago? ”
54 CABLEtalk OCTOBER/NOVEMBER 2019
Reports have to be submitted within 30 days of each six-month period within a company’s financial year and they must include: ●●average number of days to pay suppliers from the date of receipt of invoice or payment application ●●percentage of payments paid in 30 days or less, between 31 and 60 days and in 61 days or longer ●●percentage of payments not discharged within the agreed terms. A UK Government website has been
set up to display the data. The availability of this information has now prompted the Chartered Institute of Credit Management to check whether the PPC’s signatories are all paying within 60 days.
So, how useful is the PPC? The short answer is: As useful as a chocolate hot water bottle. But let’s answer the question in full by asking another question: Has it shortened payment times in the ten years of its existence? The answer must surely be a resounding no. In fact, payment performance has worsened over that period and is still showing no signs of long-term improvement. Research published by SEC Group
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