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Business Cash Flow

Business, Innovation and Skills written question – answered on 14th December 2011.

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Photo of Jo Johnson Jo Johnson Conservative, Orpington

To ask the Secretary of State for Business, Innovation and Skills what steps his Department is taking to improve cash flows for small and medium-sized enterprises.

Photo of Mark Prisk Mark Prisk The Minister of State, Department for Business, Innovation and Skills

The Government understand the importance of managing cash flow and are determined to do everything they can to help business do this successfully. Transforming the longstanding culture of late payment requires a multi-faceted strategy to engage and educate business.

Late payment legislation gives businesses a statutory right to claim interest from other businesses for the late payment of commercial debt, and where there are no pre-agreed payment terms, the legislation provides that the payment period is 30 days from the later of either delivery of goods or receipt of invoice. Further advice on this legislation and on claiming interest for late payments can be found at:

The Prompt Payment Code developed with the Institute of Credit Management (ICM) seeks to identify payment exemplars across both the public and private sectors and to codify good practice. Signatories to the code are required to pay within agreed terms and to communicate effectively with suppliers. As at 1 December 2011, nearly 1,060 organisations have signed up to the Prompt Payment Code. Further information on the code can be found at:

We have also worked with the ICM to produce a series of checklists on all aspects of cash flow management, available at:

As at November 2011, there have been nearly 265, 000 downloads of the guides.

It is also important that the public sector sets a strong example, and central Government Departments now aim to pay 80% of undisputed invoices within five days. In October 2011, this Department paid 95.6% of its invoices within this timeframe. To ensure the benefits of prompt payment to main contractors are felt through the supply chain, all Departments have included a clause in their contracts that requires main contractors to pay their suppliers within 30 days.

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