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The government is not allocating funding to upgrade payment systems to meet the prime minister's commitment to pay small suppliers faster during the credit crunch.

The Department for Business, Enterprise and Regulatory Reform (BERR), which is coordinating payment changes to help small and medium enterprises (SMEs), said that no budget has been allocated for administrative and IT changes, but that the cost to the exchequer of bringing forward £8bn worth of payments to 10 days would be about £16m in lost or added interest.

The process of change has already begun, according to BERR, and departments are reviewing their systems with the aim of driving up their payments performance.

The prime minister told the House of Commons on 8 October 2008 that cash flow is a particular problem for small companies during this critical time for the economy. Late payment problems, Brown said, have intensified, with all firms lengthening the time they take to pay their suppliers.

"The government can ease the situation, and we can help cash flow through prompt payment. The government has already agreed to move its procurement rules from payments within 30 days to a commitment to pay as soon as possible.

"In the current climate, we need to go further with a harder targets. We will therefore aim to make SME payments within 10 days. The government will pick up the cost of that, but it is a small price to pay for greatly increasing cash flow associated with £8bn of contracts with SMEs."

A range of measures to help departments to achieve this will be introduced by BERR. They include:

  • Standard guidance to suppliers on how to submit invoices
  • Ready access to guidance within the supplier's terms and conditions and on all public facing websites
  • A common standard for establishing when an invoice is received
  • A common standard for counting elapsed days

"Most departments will also need to invest in their internal compliance procedures to ensure that managers generate purchase orders and authorise payments correctly and speedily," a spokesperson for BERR told GC News.

This article was originally published at Kablenet.

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