In December 2008, at a “prompt payment summit”, the Business Secretary, Lord Mandelson, launched a new Code of Practice aimed at increasing the speed of payments to small companies (SMEs). This summit followed an earlier Government commitment to pay its suppliers within 10 days.
The Code focuses on three main areas:
- a commitment to pay suppliers on time, within the payment terms agreed and without trying to retrospectively change those terms;
- giving clear guidance to suppliers on payment procedures, including advising if an invoice will not be paid; and
- encouraging good practice throughout the supplier’s own supply chain.
The Olympic Delivery Authority (ODA) has followed the Government’s lead and has also announced it will pay suppliers promptly. Just before Christmas, the Times reported that the ODA will pay undisputed invoices within 18 days.
Despite these Government-backed initiatives, it seems all is not well in the construction industry and some sub-contractors are having to wait as long as 120 days for payment (see news article).
And, in practice, what is really happening?
- Are payment periods being shortened or are companies and the Government simply paying “lip service” to these pledges?
- If these changes have been put in place, how has this been achieved and what impact does it have on the statutory payment/withholding notice provisions?
- What does “undisputed” mean? Is that a sting in the tail?
We would be interested to hear your experiences.