Businesses with poor payment practices excluded from bidding for Government contracts

Wiseman Admin2019, CommercialLeave a Comment

Big businesses with poor payment practices will no longer be able to bid for Government contracts under new corporate guidelines.

The changes, which form part of the enhanced Prompt Payment Code, went into effect on 01 September 2019.

Setting standards for payment practices and best practice, the Prompt Payment Code was designed to help small businesses and suppliers get paid on time.

However, critics, including the Federation of Small Businesses (FSB), the National Federation of Builders (NFB) and the Association of Accounting Technicians (AAT), said the rules did not go far enough.

The changes, first announced in November 2018, will require 95 per cent of all supply chain invoices to be paid within 60 days for organisations to bid for taxpayer-funded contracts.

Any business applying for a Government contract in excess of £5 million a year may also need to demonstrate how suppliers will be paid on time.

Welcoming the move, FSB National Chairman Mike Cherry said the changes will “send a message” that late payments will not be tolerated.

“This will prevent another Carillion, where payment terms were lengthened as the company fell into difficulty, hoarded taxpayers’ money and tried to improve its cash flow off the back of its small suppliers,” he said.

“As late paying Government suppliers are discovered, they must clean up their act by being placed under special measures for the duration of that contract and then ultimately excluded.”

He added: “Measures to open up public procurement will give tax payers and our public services access to the innovation and value small firms bring, as well as helping our economy. This is a challenge, and there is, of course, more work to do, but today’s announcement is an important step.”

According to the latest statistics, some 43 per cent of SMEs experience late payments, with the average unpaid invoice sitting at £9,000.

For help and advice with late payments, please get in touch with our expert team.

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