Spec Finish

Feature www.thefis.org 27 HELPING SMALLER BUSINESSES TO FEEL EMPOWERED AND RESPECTED The statement on the front page of the Prompt Payment Code (PPC) website says: ‘Paying suppliers or partners promptly and within the agreed payment terms is not only an ethical responsibility but economically beneficial for all parties and the wider economy. Speed and certainty of payment and stable cashflow are essential for all businesses to flourish and grow.’ T he PPC is a voluntary code of practice for businesses, administered by Small Business Commissioner (SBC) on behalf of the Department for Business, Energy & Industrial Strategy (BEIS). It was established in December 2008 and sets standards for payment practices between organisations of any size and their suppliers. Liz Barclay is the current SBC and at the FIS conference in September, she spoke about the detrimental effects that late payments are having on our sector – and on business in general. Chasing payments can often be part of the daily grind for small businesses (defined as a business with fewer than 50 employees) but encouraging big businesses to sign up to the Prompt Payment Code should help to see the back of this task. Signatories to the PPC undertake to: • pay suppliers on time, within agreed terms; • give clear guidance to suppliers on terms, dispute resolution and prompt notification of late payment; and • support good practice throughout their supply chain by encouraging adoption of the Code. Although the PPC is voluntary, signing up to it is a way of protecting small businesses as signatories commit to pay the small businesses in their supply chain in 30 days. Often, there are extended payment terms in contracts – with the ‘payment date’ being many days or weeks PAST the ‘due date’, and there may be additional issues such as retentions and valuations disputes, but the big issue causing many sleepless nights for subcontractors is cashflow. A high level dispute between contractors will often mean that a small subcontractor further down the chain goes unpaid. Large entities have the resources to wait until they eventually resolve disputes but small businesses simply don’t have this resilience and the problem of late payment is turning into a big mental health issue. The SBC is pushing the PPC as an ‘ethical regulatory tool’; signing up to it is simply the right thing to do – it demonstrates that bigger businesses are committed to paying on time and it gives them the opportunity to really deeply examine their own payment practices. Complex construction contracts Of course, late payment is only part of fair payment and in construction we have retentions, challenges about variations and change due to the nature of work programmes. So we spoke to Liz on behalf of FIS members and asked her how our industry compares with other sectors, she said: “There seems to be more complexity in construction contracts than in many other sectors. As I’ve found through speaking to contacts and stakeholders, there is limited information sharing about payment approaches, either within linked sectors or across different business communities. Some construction projects are hugely complex and changes to contract expectations and relationships between clients, contractors and supply chains can be volatile. As a result, there is more nuance across the construction sector around payment relationships than elsewhere, but there seems to be increasing willingness to pay promptly, accurately and in line with expectation.” Confidence Much of the PPC’s strength comes from the awareness it drives among small businesses of their right to expect payment within 30 days. Signatories of whatever size make a public commitment to paying their small suppliers promptly. Liz said: “We’d hope that they would also want to make a public declaration about this commitment. Other small suppliers see this declaration and then feel confident about working with the signatory, and may recommend working with Liz Barclay, Small Business Commissioner