Paying on time is good for business
26 February 2009
A new initiative to promote the benefits of prompt payment has been launched by the Institute of Credit Management (ICM), to coincide with the first official feedback on the success of the government’s new Prompt Payment Code (PPC) and the success of its free business ‘Health Checks’.
To date nearly 100 businesses have signed up to the code, and a further 35,000 have taken advantage of the free health checks, but the ICM’s Director General Philip King believes that still more needs to be done to convince businesses as to the benefits of paying suppliers on time:
“At a time when money is tight and cashflow critical, it may sound counter-intuitive to be encouraging buyers to part with their money more quickly in order to pay suppliers,” he says. “The advantages, however, go far deeper than simply being seen to treat your customers more fairly. There can be real financial benefits.”
In the same way that every supplier wants to be the ‘preferred’ party, so too do buyers want to be first on their suppliers’ list, according to Mr King: “Prompt payment acts towards establishing the very best customer/supplier relationships,” he says, “which in turn enables customers to negotiate better deals and avoid such issues as late payment interest charges.
“Furthermore,” he adds, “when perception is everything, it delivers a signal to the market of confidence and sound financial wellbeing that in turn promotes further business opportunities and growth.”
The ICM’s advice comes on the day when businesses again met with representatives of BERR and the Business Secretary Lord Mandelson to discuss the progress of the PPC, part of a campaign designed to help increase the speed of payments to smaller companies.
BERR is also reporting the success of its health check initiative being conducted by its Business Link network. A common theme to all businesses is the issue of cashflow, and since November 2008 more than 35,000 businesses have downloaded one of the ICM’s ‘Managing Cashflow’ guides produced by the Institute for the government.
The code, developed with the ICM and supported by major business organisations, aims to establish a clear and consistent policy in the payment of business to business invoices. It is being hosted by the ICM on a dedicated website (www.promptpaymentcode.org.uk) and includes a facility for suppliers to raise concerns about late payers.
The code of focuses on three main areas: a commitment to pay suppliers on time; to give clear guidance to suppliers; and to encourage good practice.