The recently introduced Fair Payment Code, replacing the Prompt Payment Code, is set to significantly increase the importance of fast and accurate construction payments – bringing Payapps’ innovative application for payment software to the forefront of the industry.
In any business, healthy cash flow is an essential aspect of growth, with long or late payment times often disrupting the cash flow process and preventing a business from paying its bills on time. Unfortunately, this can sometimes lead to business failure.
In fact, in 2023, 15% of small and medium size businesses cited late payments and cash flow issues as obstacles to running their businesses. This is hardly surprising given late payments and delayed fulfilment cost each small and medium enterprise (SME) an average of £22,000 annually.
With this in mind, the Fair Payment Code was launched on 3rd December 2024 by the UK Government – aimed at helping smaller construction firms to identify trusted and reliable partners while tackling the issue of late payments and lengthy payment terms.
It came after the appeals from many SMEs for a more aspirational, robust, and ambitious approach towards business-to-business payment culture. It replaced the Prompt Payment Code that was introduced in 2008 and then strengthened in 2021 to improve payment support infrastructure and buy-in from senior management at construction businesses.
What are the construction Fair Payment Code awards tiers?
As a result of the Fair Payment Code, businesses with a UK registered office are able to apply for one of three different award tiers – Gold, Silver, or Bronze. The tiers are aimed at recognising and awarding best practice while driving improvements in payment performance.
The three award tiers are as follows:
- Bronze Award – for those firms paying at least 95% of all invoices within 60 days.
- Silver Award – for companies paying at least 95% of all invoices within 60 days, including at least 95% of invoices to small businesses within 30 days.
- Gold Award – for those paying at least 95% of all invoices within 30 days.Furthermore, every business that receives one of the three awards agrees to abide by the Code’s principles of being Clear, Fair, and Collaborative with its suppliers.
The UK Fair Payment Code Awards last two years, meaning every business will need to reapply for its award at the end of that period. This stringent but important legislation will also require large businesses across the construction industry to include payment reporting in their annual reports. Additionally, enforcement will be enhanced on existing late payment performance reporting regulations. Any company directors seen to be non-compliant with these regulations could face criminal prosecutions, including unlimited fines, if they don’t report their company’s payment practices accordingly.
Payapps software for construction Fair Payment Code compliance
The Fair Payment Code Awards highlight the importance of prompt payments to not only ensure healthy cash flow but also encourage business growth. While spreadsheets have traditionally been submitted by email in the application for payment process, automated software, such as Payapps, provides a centralised platform for the submission and receipt of standardised applications for payment. This streamlines the process and reduces the risk of missed applications and inaccuracies, while encouraging prompt and reliable payments.
A cloud-based collaboration tool, Payapps helps contractors and subcontractors simplify and expedite the assessment of applications for payment including retention and variations. Ensuring greater transparency, reduced financial risk, fairer outcomes, fewer disputes, and improved compliance, users of this construction payment management software have reported this simple and fast digital process can significantly cut application for payment processing time by up to 50%.
Payapps software integrates with popular construction ERP and accounting systems to provide a seamless handover of data from commercial to finance teams without the need to rekey information.. What’s more, with up-to-date information from application for payment submission through to certification, the finance department can more easily predict final account and report on cash flow.
Consequently, using Payapps, SMEs across the built environment are capable of demonstrating better payment performance and an opportunity to apply for the Fair Payment Code Awards.
As an alternative to the more commonly used but inefficient, traditional process involving spreadsheets and emails, Payapps provides easy-to-use, reliable software for faster and fairer payments.
For more information about how Payapps can help your business manage supply chain payments, contact us today!
Visit the Small Business Commissioner website to learn more and apply for your Fair Payment Code.
