Small Talk: The Prompt Payment Code is proving a case of too little, too late as large companies continue to play for time in settling invoices

 

New year, same old story. Despite endless government promises to crack down on late payments, it looks as if many small businesses will spend a good part of 2014 chasing larger businesses for money they are owed.

It is clear that whatever they say publicly, many large companies have no intention of paying more promptly. And why would they, when the outstanding invoices give them a handy interest-free loan – and when no one is forcing them to clean up their act?

A year ago the business minister Michael Fallon warned FTSE 350 companies that he would name and shame them unless they signed up to the Prompt Payment Code, the code of conduct that is supposed to ensure businesses throughout the supply chain have their invoices settled on time. The initiative was dubbed a success after the number of signatories more than tripled.

Just one problem – in its present form, the code is hopelessly inadequate.

Just ask the Federation of Small Businesses, which has published data revealing that more than half of its members were paid late by larger companies last year. A third of them said profitability had been damaged as a result.

Why is a government-backed code so ineffective? One problem is that there is no sanction against businesses that don’t comply with its very modest requirements – simply to settle within the terms agreed at the outset of a contract.

Nor is there any sanction against businesses that don’t sign up to the code – by the Government’s own figures, roughly 40 per cent of the total UK supply chain is accounted for by non-signatories.

Particularly hopeless is the section of the code that gives a supplier the right to challenge a client’s status as a signatory if their own experience suggests it isn’t complying. In such cases, the Institute of Credit Management, which administrates the code, simply offers to mediate between the two parties.

In the end, this is a problem that comes down to a market imbalance. Small businesses don’t feel able to rock the boat with large, powerful customers on which they may depend for survival. The Prompt Payments Code, an attempt to redress the balance, is patently failing to do so.

So what is to be done? It would help, for starters, to have stronger statutory backing for the code – a requirement for large companies to join it, for example. Strengthening its provisions, particularly on challenges, is also important so that miscreants have something to lose.

But small businesses must be more determined too – particularly in sharing information on the worst payers. Potentially disruptive platforms such as Satago, which aggregates data on the payments track record of companies, can help. So too can the bigger credit-reference agencies and small business organisations. But power comes from strength – smaller firms acting together to force bigger firms to do better.

Actual Experience builds software that helps staff at a client such as ITV to improve its digital systems

Look out for Actual Experience, a British technology diagnostics company that will list on the Alternative Investment Market on Thursday.

The business, whose origins lie in research conducted at Queen Mary University London, is expected to be valued at £16m and already boasts an impressive list of clients, including the broadcasting regulator Ofcom, ITV, Accenture, Verizon and Deutsche Post.

Actual Experience builds software that companies can use to measure the performance of the business applications they provide to their own staff and customers, and to rapidly diagnose problems hindering this performance.

The business has persuaded Stephen Davidson as to join its board as a non-executive director. He currently serves as chairman of Aim-listed Datatec.

Kick-start for techs

Startupbootcamp, the accelerator group that works with start-up businesses, has €15,000 (£12,457) to give away to 10 new financial technology companies under a new partnership it has signed with Lloyds Banking Group, MasterCard and the Dutch financial services group Rabobank.

It is also offering access to mentoring services from entrepreneurs, investors and corporate partners.

In addition, each of the 10 companies will get three months worth of free office space in central London, plus free legal and public relations advice, as well as access to networks of business angels and venture capital firms that may provide further funding.

See www.startupbootcamp.org for details.

Small Business Person of the Week: Sam Middleton, Founder of The Chapar

“We’re a personal shopping service for men – the idea is to look after the modern guy who wants to dress well and look good, but who doesn’t have time to shop. Our customers start by completing a short questionnaire on our website, and we then assign them a personal stylist, a real person who talks to them by phone.

“On the basis of the profile we build, we then send out a trunk of clothes – 12 items is pretty typical – to the customer by courier. They decide what to keep, if anything at all, and the courier then returns to pick up what’s not wanted.

“Customers only pay for the clothes they buy and there’s no charge for styling or the courier. Our business model is that of a retailer – we buy our clothing from around 45 brands, some from well-known names from towards the top end of the High Street and others from new brands, at wholesale cost and then sell them on at retail prices.

“We launched the business 18 months ago with our own money and we’ve got around 2,000 paying customers. Now we’re considering our funding options because the next stage is to scale up.

"A chapar was a longdistance horseback courier that the rulers of the Persian empire used to deliver messages. Chapars were famous for their courage and speed – we liked that idea.”

Sport
The sun rises over St Andrews golf course, but will it be a new dawn for the Royal and Ancient Golf Club?
sportAnd it's Yes to women (at the R&A)
Arts and Entertainment
Friends is celebrating its 20th anniversary this year
tvSeries celebrates 20th anniversary
Sport
Yaya Touré (left) and Bayern Munich’s Spanish defender Juan Bernat
footballToure's lack of defensive work is big problem for City
Voices
voicesApple continually kill off smaller app developers, and that's no good for anyone
PROMOTED VIDEO
Arts and Entertainment
Liam Neeson said he wouldn't
tv

Liam Neeson's Downton dreams

Sport
Wembley Stadium
footballNews follows deal with Germany
Arts and Entertainment
A spell in the sun: Emma Stone and Colin Firth star in ‘Magic in the Moonlight’
filmReview: Magic In The Moonlight
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
A 'Sir Alex Feguson' tattoo
football

Arts and Entertainment
Ben Whishaw is replacing Colin Firth as the voice of Paddington Bear
tv

Thriller is set in the secret world of British espionage

Life and Style
life

News
ScienceGallery: Otherwise known as 'the best damn photos of space you'll see till 2015'
Life and Style
fashion

Bomber jacket worn by Mary Berry sells out within an hour

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Audit Manager Central Functions

To £85,000 + banking benefits: Saxton Leigh: You will be expected to carry out...

Credit Risk Audit Manager

Up to £90,000 + benefits: Saxton Leigh: Credit Risk Audit Manager required to ...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week