Four years after the Prompt Payment Code (PPC) was launched1, Experian reveals that the difference between the late payment times of the largest firms (more than 1,000 employees) and the smallest firms (up to 25 employees) has improved significantly, falling by almost nine days during this period, driven by better payment behaviour amongst the UK’s biggest companies.
Whilst overall payment times have stayed relatively stable over the period – currently 25 Days Beyond Terms (DBT), Experian says that more can still be done by companies to tackle late payment. The new research by Experian looked at payment performance for UK companies between December 2008 – when the PPC was launched – and November 2012. It shows that since the launch of the PPC, average DBT initially dropped from 23.5 in December 2008 to 21.1 in July 2010, rising to a high of 27.7 in November 2010 and has since stabilised.
When Experian examined payment performance by company size, whilst the UK’s largest companies were paying on average 25 days slower compared to smaller companies in December 2008, despite smaller companies paying at the same speed now as 4 years ago, the difference is now just 16 days as a result of the improvements made by the larger companies.
The data indicates that PPC has had a positive effect on payment times. Experian reviewed the difference between the average payment times of signatories and non-signatories to the Code over each of the last four years. It found that on average those who had signed up to the Code paid five days earlier that those who had not. Furthermore, there has been a sizable improvement over the period amongst PPC signatories who now pay 12 days quicker than in December 2008.
The only exception is the largest companies who are signed up to the PPC. These actually saw slightly slower payment times compared to non-signatories, though nonetheless improving since December 2008. This could suggest that whilst they are showing willingness to improve and tackle payment times, the size of the business and the sheer volume of invoices and suppliers they deal with may be hindering their progress.
Max Firth, UK Managing Director for Experian’s Business Information Services division, said: “Since the launch of the Prompt Payment Code, it is encouraging to see that PPC signatories are paying on average five days faster than non-signatories, showing a real shift in payment culture. The UK’s biggest firms have made significant progress in terms of improvement to their payment times compared to their smaller counterparts.
“Although they have made significant improvements the very nature of the way large businesses are structured – hundreds of suppliers, multi-sites, multi-departments, stringent processes – makes it difficult for them to be agile when it comes to paying as fast as smaller more flexible businesses.
“Further improvement is needed across the board and it is vital that firms of all sizes think about their collection strategies. Smaller firms could benefit by adopting some of the strategies employed by their larger counterparts to help ensure they get paid on time. Simple things like checking their credit report for details of how quickly they pay their other suppliers and taking this into account, issuing invoices on time and following up queries. In addition, when dealing with large companies, they need to ensure that invoices contain all relevant information, such as purchase order numbers to make the process as smooth as possible.”
