EOW Reflections: Businesses want clarity

The Fair Payment Code team are working their socks off. The expressions of interest are crowding in. The applications are following at pace. The questions being raised cover every possible aspect of the payments, contracts and the behaviours expected from Award winners. And still new questions arise.

Applicants want clarity and there are still aspects we’ve not anticipated, and aren’t clear from the guidance. Today we were asked to define a supplier, whether paying in 30 days net is the same as 30 days and what form a contract should take. We’re helping with all those and many more. There’s no such thing as a daft question in our view so please don’t hesitate to contact us if anything’s unclear.

One of our biggest problems is that people don’t understand that the Department for Business and Trade’s Payment Performance Reporting Scheme is not part of the new Code. It wasn’t part of the previous Code either but the two are constantly being confused and conflated. Under the reporting scheme (sometimes referred to as the PPR or the data scheme) the biggest firms in the UK must, by law, report to the Department, through the reporting portal, twice a year, details of how they pay their supplier invoices. They are asked how many invoices are paid in 0-30 days, how many in 31- 60 and how many over 60. They’re also asked what percentage of those invoices are paid later than their agreed due date. The information reported by those firms is available to the public.

The idea of the reporting scheme is that suppliers can check how a big firm they are considering supplying pays. If they don’t like what they see in the data, they can choose not to supply a poor payer and look elsewhere for a better paying customer. For the scheme to work big firms must report if they fall under the scope of the scheme and report accurately. There are penalties including fines and prosecution if firms that should be reporting, don’t report. The Department is putting a lot more resources behind making sure the scheme works as it’s supposed and it’s possible there could be prosecutions in future.

However this has nothing to do with the Code. The Fair Payment Code (FPC) does also belong to the Department for Business and Trade, but it is administered by the team in the OSBC. It’s voluntary to apply. If a big firm that is also reporting into the Payment Performance Reporting Scheme wants to apply to the FPC for a Gold, Silver or Bronze Award, it will be able to use the payment performance data that’s in its report to show us as evidence of how many invoices are being paid within 60 days, but like any other applicant it will have to provide other supporting evidence like references from suppliers and examples of contracts to prove that it’s paying quickly, fairly and being clear with suppliers about payment terms. The FPC is a separate beast with its own rules and requirements and only when we’re satisfied that applicants meet these requirements will the applicant get a Gold, Silver, or Bronze Award.

Firms joined the previous Code by simply signing up. We had to take their word they were behaving fairly and paying as quickly as they claimed. We had no way of checking they were compliant and as time went by many signatories simply let the Code slip and forgot they had signed up or neglected to tell us that they were no longer meeting the criteria for membership. With the new FPC the team makes the decisions around who gets which award depending on the proof they are supplied.

We’ve raised the bar. Many applicants are surprised at being asked to prove they comply. If you can’t quite make the grade just now, we will help you get there so don’t despair, but there may be work to do and there’s no automatic right to ‘sign’ up. And if you are also reporting under the PPR that’s a different scheme with a different reporting requirement. On reflection I’m not sure we’ve been as clear as possible. We’re learning too and will keep adding to the guidance as your questions come in. Together we’re working for fairer payments all round. #EveryoneBenefits.