Fair’s Fair

Next week will be a big week for the OSBC. We’re finally launching our new Code. The Fair Payment Code will replace the Prompt Payment Code. The PPC ceased to exist on Thursday 28th Nov and applications will open for the FPC on 3rd Dec.

We are still getting PPC applications, so many people still haven’t heard about the change. We’ll be driving the communications hard from 3rd and would greatly appreciate your help in getting the message out. We want firms to apply and intend to announce, around the end of February 2025, the firms that have achieved Gold, Silver or Bronze Awards. Each award given will last for 2 years and then firms will have to apply again.

Some of the change is about making sure firms are engaged with the ethos of improving payment practices and behaviour, and some of it is about language.

I’ve always thought that paying promptly shouldn’t be the aim. If I have a contract that says I’ll be paid in 120 days and I receive the money on day 119, it’s prompt, but usually it won’t be ‘fair’. We will be thinking hard about what is fair. People constantly complained to the Financial Conduct Authority when it brought in rules around ‘treating customers fairly’. Firms asked ‘what does fair mean?’ I think most people do understand what’s fair and what isn’t but we’ll be helping procurement and payments teams in bigger businesses to understand the needs of their small suppliers better and reflect on how to make sure they are supported, nurtured and can remain resilient and sustainable to the benefit of the whole supply chain and their customers, through better payment terms.

Bigger customers often fail to understand how their smaller, and in particular the smallest suppliers, operate. They put in place processes that are complex, onerous and expensive because they assume small businesses are just small versions of big firms and have the same levels or capability and resource. Contracts and terms of trading are written in incomprehensible legalese. Spelling out payment terms clearly in written contracts that everyone can understand is fair as is paying quickly within 30 days. Paying slow and late isn’t fair and can be existential.

Then there’s the engagement issue. Firms applied to sign up to the PPC and in some cases promptly forgot they had committed to the terms of that Code. I’ve have heard the argument so often: ‘It’s a voluntary Code’. When a Code is voluntary that means no one can force you to sign up or apply to join. However, once you have applied, been accepted, signed on the dotted line or been given an award, you have committed yourself to meeting the criteria and following the rules. Applying is voluntary but complying is not. Engagement with the OSBC Code team is therefore a big plank of the new FPC. We expect anyone with a Gold, Silver or Bronze Award to engage with us, meet the criteria, be able to prove they are compliant and behave in the ways set out in the detail of the Code. No more signing up and forgetting about it. This new Code is about changing the payment culture and looking for ways to continually improve payment practices between businesses of all sizes and being fair to small suppliers.

We will help you get there. I firmly believe it’s better for everyone of any size in the supply chain if all the links in the chain are treated fairly, with understanding and respect, and paid on time as agreed and on fair contractual payment terms. Certainty allows everyone to thrive, invest and grow. #EveryoneBenefits. Join us from 3rd December.