Open ECX Fair Payment Code

The Fair Payment Code and What it Means for Your Business

Late payments have long been a thorn in the side of businesses, straining cash flow and damaging supplier relationships. The Prompt Payment Code aimed to address this challenge by encouraging timely payments. However, as businesses evolve, so must the frameworks that govern them. Enter the new Fair Payment Code, which was launched on the 3^rd Dec 2024 to replace the Prompt Payment Code.

The Fair Payment Code builds upon its predecessor with a renewed focus on incentivising fair payment practices. This guide provides an overview of the new framework, the changes it introduces, and the benefits it offers to businesses. Whether you’re in construction, retail, or manufacturing, this article will help you understand what the Fair Payment Code means for your organisation.

What is the Fair Payment Code?

The Fair Payment Code is more than just an update to the PPC. It’s a necessary evolution in addressing the persistent issues of overdue invoices and extended payment terms.

The Fair Payment Code incentivises quicker and more timely payments through a tiered reward system. Businesses can now earn bronze, silver, or gold status, which recognises their commitment to fair payment practices. This approach not only rewards good behaviour but also creates a competitive edge for organisations that prioritise supplier relationships. It also introduces the requirement for applicants to provide evidence of their payment practices, allows for compliance checks, and adds in the commitment to behave fairly to suppliers by providing clear and understandable terms in contracts and avoiding disputes. It also grants gold, silver and bronze awards for two years, after which firms wishing to remain on the Code will have to reapply.

Additionally, the Fair Payment Code reflects the growing emphasis on accountability within central government contracts, where stricter payment criteria are being enforced. By aligning with these principles, the new code positions itself as a key driver of fairer, more reliable payment practices across all sectors.

Watch our Webinar to Find Out More

Liz Barclay,

UK Government Small Business Commissioner

Fair payment practices are essential for building trust and stability across supply chains. The Fair Payment Code ensures businesses of all sizes can thrive together.

Key Changes and How They Affect Businesses

The Fair Payment Code introduces several significant changes aimed at creating a more transparent and equitable payment landscape. For businesses, particularly finance teams, these changes will require adjustments to current processes to meet the new standards.

Reward Tiers: Bronze, Silver, Gold
One of the standout features of the new framework is its tiered reward system. Businesses earn recognition based on their payment practices, with gold status reserved for those demonstrating the highest levels of compliance. This system not only incentivises better practices but also enhances the reputation of organisations committed to fair payments. For organisations already adhering to the Prompt Payment Code (PPC), transitioning to the Fair Payment Code should be straightforward, as existing PPC standards align with silver-level criteria.

However, it also gives a clear signal of intent on the part of the Government: businesses will be expected to work towards payment of at least 95% of all invoices within 30 days, even if they don’t reach that standard currently.

Alignment with Government Expectations
For private businesses working on government contracts, adopting the Fair Payment Code ensures alignment with the expectations for payment practices, enhancing credibility and demonstrating a commitment to ethical standards.

Review Existing Finance Practices
The Fair Payment Code’s framework encourages businesses to improve their invoicing and payment systems and will have a direct impact on how businesses handle invoicing and supplier payments. As a result, these changes may prompt many to review their current practices and adopt more efficient, digitised processes to stay compliant.

The Fair Payment Code For Your Industry

The Fair Payment Code is designed to be universally applicable, but its impact will be particularly significant in certain industries. Sectors like construction, retail, and manufacturing often face complex supply chains and high reliance on smaller suppliers, making timely payments a cornerstone of operational success.

Construction
In construction, where projects often span months or years and involve multiple subcontractors, late payments can disrupt entire supply chains. Adopting the Fair Payment Code can mitigate risks, ensuring smoother project timelines and fostering trust among contractors and subcontractors.

Retail
Retailers depend on a steady supply of goods to meet customer demand. Fair payment practices strengthen relationships with suppliers, ensuring stock availability and preventing disruptions that could lead to lost revenue or reputational damage.

Manufacturing
Manufacturers rely on complex supply chains involving raw material suppliers, logistics providers, and distributors. Delays in payment can cause significant disruptions, halting production lines and damaging relationships with critical suppliers. By adhering to the Fair Payment Code, manufacturers can ensure the smooth operation of their supply chains, reduce the risk of downtime, and build stronger partnerships that enhance long-term stability and growth.

Open ECX's Fair Payment Software

Meeting the Fair Payment Code standards requires efficient systems and business processes in place to ensure suppliers are consistently paid on time. Open ECX provides financial process automation software that facilitates fair payment practices by optimising AP processes, speeding up processing times, improving accuracy, and enhancing relationships across the supply chain network.

Open ECX Invoicing eliminates the challenges associated with the manual processing of incoming invoices and the use of legacy technology, optimising the entire invoicing process and helping businesses process payments on time, supporting businesses in their commitment to the Fair Payment Code.

Open ECX Statement Reconciliation revolutionises the process of reconciling incoming invoices to supplier statements, reducing errors and delays.

By automating these processes, Open ECX empowers organisations to easily comply with the Fair Payment Code, positioning us as enablers of fair and ethical payment practices.

Find out more

Liz Barclay,

UK Government Small Business Commissioner

Industries like construction, retail, and manufacturing play a pivotal role in driving the adoption of fair payment practices, setting the tone for healthier, more collaborative business ecosystems

Enter your details to gain your exclusive access to the Fair Payment Webinar recording

In this webinar recording, our Founder, Matthew Jones, our CTO, Andrew Froude, and Liz Barclay discussed what the Fair Payment Code is, what it aims to achieve, the reasons it has been introduced, and what it means for your business.

They will also explain how our solutions can enable you to comply with fair and ethical payment practices.

The Fair Payment Code