Ireland has announced the wording of its Code of Conduct on Prompt Payments, a voluntary charter similar to that in place in the UK.
Small business minister John Perry announced the Code on July 1st; it is supported by the Department of Jobs, Enterprise and Innovation.
Like in the UK, small businesses represent a crucial and sizeable component of the Irish economy, employing 650,000 people and adding €10 billion in taxes to the economy each year.
But like UK small businesses, their Irish counterparts also suffer from interruptions to cash flow, and can be less capable of withstanding financial shocks than larger firms.
Mr Perry says: "The Irish Government is acutely aware of the importance of the small business sector, its potential for generating employment and the many issues currently facing SMEs in Ireland, including the issue of prompt payments."
Prompt Payment Code Commitments
Irish firms who sign up to the Code of Conduct on Prompt Payments will commit to three main obligations:
- pay suppliers on time, within the agreed terms of contracts, and in accordance with prevailing legislation;
- give clear guidance to suppliers on their payment procedures;
- encourage good practice by promoting voluntary adoption of the Code by others.
The introduction of the Code has been given considerable significance by the Irish Government, which has factored it into its Action Plan for Jobs 2013.
In full, the Code reads as follows:
Pay suppliers on time
- within the terms agreed at the outset of the contract, or 30 days, in accordance with legislation
- without attempting to change payment terms retrospectively
- without changing practice on length of payment for smaller companies on unreasonable grounds
Give clear guidance to suppliers
- providing suppliers with clear and easily accessible guidance on payment procedures
- ensuring there is a system for dealing with complaints and disputes which is communicated to suppliers
- advising them promptly if there is any reason why an invoice will not be paid to the agreed terms
Encourage good practice
- by requesting that lead suppliers encourage adoption of the code throughout their own supply chains
Irish firms voluntarily signing up to the Code are governed by the prevailing legislation too, which is currently the European Communities (Late Payment in Commercial Transactions) Regulations 2012, which enacted Directive 2011/7/EU on Combating Late Payment in Commercial Transactions.
Payment in 15 Days
In many cases, Irish firms working with the public sector can now expect payment within 15 days, as an extension of a previously existing payment target.
The 15-day prompt payment requirement was already in place for central government departments, and has now been extended to include all Irish state agencies as well.
Mr Perry said: "I believe the publication of a Code of Conduct on Prompt Payments, combined with the recent implementation of the Late Payment Directive and the 15-day prompt payment arrangement for the public sector, will represent significant progress on the issue of prompt payments in Ireland in 2013."
Targeting Big Businesses
While the publication of the Code has been generally welcomed, ISME, the Irish representative body for small and medium-sized enterprises, has expressed concerns that its big-business counterpart IBEC has not expressed its own support for the Code.
This is in spite of - or perhaps because of - the fact that big businesses are the "main culprits" in terms of late payments to SMEs in Ireland, and ISME says big brands often treat smaller suppliers as a source of "free trade credit".
As such, ISME chief executive Mark Fielding is calling for the Irish Government to lay pressure directly on Ireland's largest firms, bypassing IBEC completely.
His comments came as ISME published the latest instalment in its own SME Credit Watch Survey on July 1st, which saw the average length of time Irish SMEs must wait for payment fall from 67 to 66 days, its lowest since autumn 2008.