Prompt Payment

Paying your bills promptly has a positive impact on your suppliers, especially small businesses.

In a nutshell

Paying invoices promptly has sound business benefits as well as being ethical and fair. Prompt payment facilitates good supply chain relationships, with bottom lines and cash flow benefiting from good practice and enhancing a company’s reputation.

What's the business benefit?

Paying promptly has benefits for you and for the resilience of your suppliers. You can expect that:

  • suppliers will be keener to work with you;
  • you’ll avoid costly late payment charges or compensation claims;
  • you’ll save on firefighting and strained relationships;
  • you’ll be able to give reliable service to your customers because your supply chain is working effectively;
  • your suppliers’ positive cash flow means that they can more reliably forecast income, pay their workers and make the necessary statutory payments.

Why is this included in the Scottish Business Pledge?

Prompt payment is a vitally important contributor to sustainable businesses.  It builds resilience, competitiveness and productivity – a driver of Scotland’s overall economic performance.

Paying valid invoices on time not only benefits suppliers but enhances your reputation as a fair business, providing positive market response for current and new work.

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Why is this good for Scotland?

There is a clear link between prompt payment, cash-flow, business performance and productivity. By agreeing to pay (undisputed) invoices on time, businesses set in motion a positive ‘supply chain reaction’ which can boost companies’ ability to compete for new work and grow the business – a key foundation of Scotland’s economic strategy.

What should I do now?

  • Establish a clear policy on prompt payment of bills. Ensure that all staff are aware of this commitment, especially those in finance and purchasing. Agree terms of payment at the start of all contracts and ensure that deadlines are met. Monitor your payment system regularly for timely payment of invoices.
  • Have a good system for clearing disputes quickly. The UK Small Business Commissioner has been set up to empower small businesses in resolving disputes around late and unfair payment issues and provides advice on how to take action if a payment is overdue. Foster good relationships with suppliers by informing them of your payment procedures and who is responsible for ensuring that payments are made.
  • Establish firm internal arrangements to ensure payment to suppliers is made within a maximum of 60 days (in line with late payment legislation requirements). Further still, start to work towards adopting 30 days as the norm. Businesses have a statutory right to claim interest and debt recovery costs if another business is late paying for goods or a service. Details are available online at: https://www.gov.uk/late-commercial-payments-interest-debt-recovery
  • You may consider signing up to the Prompt Payment Code, which encourages and promotes best practice between organisations and their suppliers. Signatories to the Code commit to paying their suppliers within clearly defined terms and to ensuring there is a proper process for dealing with any issues that may arise.

What help is available if I can't make the commitment right now?

You can speak to an advisor about improving the financial performance and cash-flow of your business at the Business Gateway, Scottish Enterprise and Highlands and Islands Enterprise.

Looking for help making your Pledge? Sign up for support.