New initiative sparks payment timeliness from big businesses

Small businesses often have trouble selling to larger companies, typically because it's often difficult for smaller vendors to receive payments on time.

Think back to your days on the elementary school playground. You never saw the small kids bully the bigger ones for their juice money. It was always the other way around. Big kids never had to pay up to their pint-sized classmates, unless an authority figure intervened. The same is true in the business realm.

Larger companies often "bully" their small providers by not paying them when they are required to do so. This can seriously hurt small businesses that rely on timely payments to turn a profit, so like the schoolyard teacher, the authorities are stepping in. Over in Britain, the government has launched new regulations that force larger companies to pay smaller businesses when their invoices are due, or else suffer serious penalties. 

The British government is imploring larger companies to sign up for the Prompt Payment Code (PPC). This is an agreement that vendors will be paid on time. Many companies are signing up because those who don't will be named publicly. Business Minister Michael Fallon explained to the online publication Business News Daily that he has high hopes for this initiative.

"Late payment is a real issue for businesses across the country," Fallon said. "We need to improve the payment culture and I welcome the response of big businesses in signing up to the common sense principles in the Prompt Payment Code. Signing up demonstrates a serious pledge to pay promptly. Reports of any companies found to be falsely committed to the value of fairness in the Code will be taken very seriously."

This same principle could be applied to businesses in the United States. In addition to the possibility of heavier regulations designed to increase the timeliness of B2B payments, vendors could implement payment solutions designed to help their own profitability.

For example, using a system that allows them to process level 3 data with line item detail will ensure that vendors pay the lowest possible interchange rate, thus increasing the value of every transaction. This will go a long way towards increasing the value of every transaction.

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