Insight Associates provide outsourced accounting and Finance Director services to ambitious and growing businesses. We work as your only resource or with existing staff to give you complete financial support including monthly management accounts, high level financial advice, robust controls and financial systems, funding and business planning, payroll & compliance, VAT returns and statutory compliance.

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Monday, March 23, 2009

Prompt Payment Code!

Am I becoming an old cynic in my advancing years (feeling a bit old at the moment!!) but is this newly launched Prompt Payment Code just a complete waste of time?

The payment practices of many larger UK businesses and most Government bodies leave a lot to be desired, forcing unreasonable terms on their suppliers and then often through their own ineptness failing to pay them even then. The issue is serious, and we have seen many clients suffer the consequences in all sectors.

However, apparently according to Peter Mandelson (Secretary of State for Business) and many others (who should know better!) the Prompt Payment Code is “a critical step in tackling the issue of late payment”. Do they really believe that by getting a few high profile players to sign up to a code that says we will pay our suppliers on time, give them guidance on how they will be paid, and encourage good practice, it will make any difference? I think not!

The main issue surely is the lack of any effective mechanism in English Law to enable you to collect your overdue debts? If a debtor does not pay, what can you really do about it to make any real difference? Take them through a pretty impotent court process and then try and enforce a judgement (which all the while is costing you more money), or charge them statutory interest? Whoopee!

It strikes me that the whole issue of giving credit to customers is a pretty risky business, and no code is really going to change that. Something much stronger is needed.

As part of the Pre Budget Report last November the Chancellor Alastair Darling said that Government Departments would be instructed to pay suppliers on 14 days. That was 4 months ago, and apparently it still is not happening! Perhaps they should sign up to their own code!!

1 comment:

  1. One company that is signed up to the PPC has found a novel way around it.. we issue them with an invoice, and they ignore it because they haven't issued us with a purchase order number so they deem the invoice as invalid.. they can then decide when they issue their PO so then and only then can we issue our invoices which they'll then deem as valid and so pay. I've asked the PPC what consequences there are for companies not complying with the code and they said.. well, we take them off the list.. as you say, whoopie!


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