The Fair Payment Code has been launched to help better tackle SMEs who are paid late. The burden of not being paid on time, and chasing payments, is weighing heavy on small firms with more than ever declaring insolvency. And with SMEs owed, on average, £22,000 a year the Code aims to help with the issues caused by overdue payments.
What is the Fair Payment Code?
The Fair Payment Code aims to boost cash flow for SMEs with a set of fair payment principles alongside three award categories. These categories are:
- Gold – for companies paying 95% of their suppliers within 30 days
- Silver – for companies paying 95% of their small business suppliers within 30 days and all other suppliers within 60 days
- Bronze – for companies paying 95% of suppliers within 60 days
The Code was announced in the run-up to Small Business Saturday on 7th December 2024. It includes a shared initiative with a number of UK banks including Barclays, HSBC UK, Lloyds Banking Group and NatWest to help support disabled entrepreneurs to access finance so they can start their own firms. The scheme will mean that the banks commit to improving access to finance products and mentoring for entrepreneurs, whilst profiling more success stories of disabled businesspeople.
Should I sign up to the Fair Payment Code?
Signing up to the Code could help your business benefit from its protections. Larger businesses who sign up will be aiming to achieve a strong award rating and show that they demonstrate timely payments. A key element connected to the success of the Code is digitisation. As a result, it will be important to ensure that that your invoicing process is robust, and you have a business bank account set up. This direction of travel will help modernise the system for all SMEs, whilst encouraging more firms to adopt technological solutions such as e-invoicing to help reduce delays.
The new code updates the Prompt Payment Code set up in 2008.