Large companies found guilty of abusing their buying power, failed to honor their commitment to pay their suppliers on time.
The Chartered Institute of Credit Management, the body that hosts and administers the Prompt Payment Code (PPC), announced it would revamp a plan to encourage faster payments to small firms.
Late payment causes thousands of English firms to shut down each year, The Times reported.
The CICM took action against Prudential PLC, British American Tobacco PLC, Fujitsu Services Limited, and 15 others earlier this month by suspending them from the PPC, a set of rules governing supplier payments that more than 2,000 U.K. companies have agreed to follow.
Companies suspended from the PPC are expected to form an action plan to improve their payment practices and will have to demonstrate compliance with the code before being eligible for reinstatement.
Prudential and other businesses have reportedly failed to honor their commitment to pay 95% of all supplier invoices within 60 days.
The WSJ reported that about one-third of payments to small businesses in the U.K. arrive late and about 20% of enterprises are facing cash flow problems because of late payments. An increase in late payments is expected this year following a potential no-deal, “hard” Brexit.
The U.K. government, alongside the Small Business Commissioner (an independent public body tasked with tackling late payments), is determined to improve the payment culture among British companies.
The Small Business Commissioner could see its remit expanded to include the ability to fine companies that miss their payment targets or to impose binding payment plans.
During 2018, the highest proportion of overdue invoices was recorded in Great Britain (92.5%) — but less than 2% of all invoices were deemed uncollectable.
Scotland has the highest level of late payments (67% of companies affected) ahead of Northern Ireland (66%), England (62%) and Wales (59%).
English, as well as European, businesses also worry about the future of their payments, and their ability to collect late invoices. Some are not sure whether they’ll be able to sell or buy on credit.
Our research found that 15% of European businesses reportedly intend to adjust to new credit management practices in 2019 and 2020, citing concerns about Brexit and its impact on receivables. Some 54% of all unpaid invoices can be attributed to banking inefficiency and payment procedures complexities — obstacles to trade that are expected to increase in a Post-Brexit Europe.
Brexit may result in reduced cash flow, unexpected expenses, and increased foreign exchange losses.
Contingency plans to avoid being negatively impacted by late payments include factoring or invoice insurance.
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