Did you know that not paying promptly can damage your business?

04 September 2019

From 1 September 2019, businesses will be prevented from winning public contracts that are worth in excess of £5 million, unless they can demonstrate that they have effective systems in place to ensure a reliable supply chain. This will include showing that they have paid 95% of their suppliers’ invoices within 60 days (or the agreed credit limit between the parties).

The Government’s incentive for this is to send a clear message to larger businesses that paying late is not acceptable. This is likely to benefit smaller businesses who undertake services for the larger businesses that perform public contracts.  

Although the prompt payment initiative only applies to businesses that perform public contracts in excess of £5 million, it is nonetheless important that all businesses ensure that their undisputed invoices are paid on time. Invoices that are paid late can be subject to additional interest and compensation under the Late Payment of Commercial Debts (Interest) Act 1998 and, especially where there is a high amount owed, these additional costs can quickly add up.

Businesses of all sizes must therefore ensure that they have effective systems in place to ensure prompt payment to prevent losing out on valuable contracts and paying interest and compensation due to having an ineffective payment system in place.

Please contact the Dispute Resolution team on 01254 828300 to discuss further.