Managing Your Cash Flow

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Big contractors are failing to pay up on time

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While official figures show most central government departments pay main contractors within ten days, the Forum of Private Business (FPB) has revealed that some sub-contractors and suppliers have been left waiting for payments for months at a time.
 
Glasgow-based EG Heating and Plumbing was recently forced to wait 60 days to be paid by Interserve Defence (even though Interserve itself had been paid by the MOD within ten days). “Small companies like ours are normally at the bottom of the supply chain so don’t experience the prompt payment enjoyed by main contractors,” says Eleanor Grant, who runs EG Heating and Plumbing with her husband, Eddie.

The FPB has raised the issue with Peter Luff MP, the minister for defence equipment, support and technology.
 
“Passing on prompt public sector payment throughout the supply chain would not only help more small firms maintain a healthy cash flow, it would encourage more businesses to bid for public contracts,” says the FPB’s head of policy Matt Goodman.
 
Using Freedom of Information (FoI) legislation, the FPB asked the MoD to provide details of payment times to suppliers.
 
It replied that it is “fully committed to paying 90 per cent of valid invoices” within ten days and that, since March 2009, it has “consistently exceeded” the target. The MoD also said that the latest figures show that 97.5 per cent of invoices submitted by all suppliers were paid “within 10 days of receipt”. It added that main contractors’ payments to sub contractors should be made “within a specific period not exceeding 30 days from receipt of a valid claim as defined by the sub-contract requirements”.
 
“The danger is that this is the tip of the iceberg – the issue is certainly not restricted to the any one sector,” added Goodman. “We need to build on the work done to create Prompt Payment Code so that timely payment, in full, becomes the norm across the UK.
 
“The risk is that that more firms go under because they are unable to maintain any kind of cash flow because of late payment from larger companies.”
 

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