Government Payment Terms

The precise nature of Government Payment Terms was defined in the policy document released on 12 December 2008, called Prompt Payment Guidance for Public Sector Organisations (http://www.berr.gov.uk/about/procurement/prompt-payment/guidance-for-public-sector-organisations). It states:

The standard terms and conditions in most HMG contracts and the legislative periods within the Late Payment of Commercial Debts (Interest) Act 1998 will remain at 30 days. (http://www.legislation.gov.uk/ukpga/1998/20/contents)

 

Whenever possible, Central Government bodies will pay within 10 days. The guidance commits itself to abiding by the terms of the Late Payment of Commercial Debts (Interest) Act 1998, which describes the types of business constrained by the act:

“business” includes a profession and the activities of any government department or local or public authority (Part I, Section 2).

The Prompt Payment Guidance to the Public Sector further states:

The aim of this HMG policy is to speed up cash flow from HMG to its suppliers, particularly SMEs. This means that:
Efforts should be made to resolve all payment related disputes quickly. Suppliers should be informed as soon as possible if an invoice is in dispute and of the reason why a dispute has been raised.
Although grants are excluded from the prompt payment initiative, organisations should ensure that all their payment processes, including those for grants, are as efficient as possible, particularly where SMEs are the recipients.
Each organisation is responsible for communicating with its own suppliers to ensure that they understand the processes involved and know how to escalate issues if they arise.
Timing
The days will be counted from the date of receipt at the organisation’s designated address.
Payment should arrive in the destination bank account on or before the 10th working day thereafter.
The target applies to valid invoices rendered to the correct address – organisations are responsible for making sure their own suppliers understand their criteria for these two conditions to be met.
Payment methods
BACS should be the default method for making HMG payments to non-government suppliers.
GPC payments should be considered for low-value payments. Each organisation will need to conduct its own risk assessment to establish the limits within which GPC payments can be made. It should be noted that, although GPC payments are within two days on authorisation by the card issuer, there is no link to the date of receipt of an invoice and proving that the new payment target has been met is likely to be resource intensive.

‘GPC’ is an abbreviation of Government Procurement Card, a government credit card issued for low level procurement.
In conclusion, Government Procurement Terms are a standard 30 days for the whole of the public sector, with an optional 10 days for Central Government organisations when possible. Suppliers should always note the importance of providing accurate invoices and purchase order numbers, when required.