How to ensure a healthy relationship with your construction supply chain? (Prompt Payment Code)

The industry is changing. Since the beginning of 2020, the cash flow of small businesses has taken a hit, making it difficult for firms to thrive, or even survive. The Government has stepped in, recognizing that much of the UK’s innovation and development is born out of small businesses, and introduced a solution. As part of a new reform, signatories of the Prompt Payment Code (PPC) will now have 30 days to pay invoices to small businesses. This slashes payment times in half, from the originally required 60 days.

What does this mean for you?

The UK Government has an aspiration of ensuring 33% of all procurement spend is with SME’s. Additionally, the government has issued a new logo for PPC signatories to use for promotional purposes. Recently changes to legislation requires clients tendering for works packages to evidence how they will drive innovation and support SME’s within their supply chain. Companies that vow to stand by the PPC regulation will reduce friction with SME’s and it will act as evidence to support their commitment to include more SME’s in the supply chain.

Due to the innovative nature of SME’s, companies can enjoy a competitive edge on tenders for future works by taking proactive action to build a supply chain rich in small businesses, particularly coupled with the newly introduced signatory stamp of the Prompt Payment Code.

Is your business setup to work with SME’s?

At a macro level, we see the vast majority of innovation in the industry come from SME’s. The latest technology such as cutting edge Artificial Intelligence systems, digital twins, and lidar systems tend to originate from SME firms. For larger corporates looking to embrace innovation, being compatible to work with SME’s is essential. So the question is, how well prepared is your company to work with SME’s?

To partner with small firms, you need to pay them. Smaller firms are highly reliant on prompt payment to continue to operate and innovate. Without a system in place to ensure prompt payment, it becomes challenging for smaller businesses to work with large corporates. Since one of the biggest concerns for SME’s is cash flow, many won’t even consider working with larger companies that can’t guarantee timely payment. That’s where the benefits of the Prompt Payment Code comes in.

Who is doing this already?

Bouygues UK have taken a proactive approach to this matter and demand that their suppliers are paid promptly. To bring down payment times and guarantee more prompt payment of supplier invoices, Bouygues UK have leveraged Qflow’s technology to keep track of their invoices and maintain a healthy relationship with their supply chain. To learn more about Bouygues work with Qflow, read the case study here.

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