Government pledges five-day payment terms for small firms

The government has promised to pay 90% of small businesses it employs within a week of receiving an invoice.

In an announcement made by small business minister Kelly Tolhurst the government has revealed it expects all its departments to commit to paying 90% of undisputed invoices from SMEs within five days.

All departments will also be required to have a dedicated non-executive director responsible for prompt payment, improving payment practices and exploring how better to use technology to make payment processes more efficient.

Cabinet office minister for implementation Oliver Dowden said: "We expect the highest payment standards from both government and big business.

"That is why we will commit to central government aiming to pay 90% of undisputed invoices from small and medium sized businesses within five days. Small firms can also report poor payment practices via our Mystery Shopper service, which ensures their voices are heard.

"We are listening to businesses and doing more than ever to level the playing field for small businesses to win work in the public sector."

The announcement comes as the government has launched a call for evidence seeking views and experiences on the impact of unfair payment practices.

Tolhurst said: "Over the past five years the amount owed to businesses in late payments has halved, but we will go further to make sure all of our small businesses are treated fairly.

"Today’s new call for evidence will help us identify the most effective way possible to tackle this issue once and for all, and ensure small businesses are on a level playing field with their larger counterparts."

The call for evidence will also be used to consider the best way company boards can put in place responsible payment practices throughout their supply chain, for example giving a non-executive director specific responsibilities for the company’s prompt payment performance.