Prompt Payments for goods and services rendered is critical to the effective working of any economy and is an issue on which this Government places great emphasis. In an effort to help ease cash flow difficulties for Irish small businesses operating under the current economic environment, while at the same time, setting an example for businesses in the private sector to improve their payment record by paying each other more promptly, Ireland has introduced, on a voluntary basis:
A 15 days prompt payment requirement for all central Government Departments to pay their business suppliers within 15 days of receipt of a valid invoice. This arrangement applies to all valid invoices received on or after 15 June 2009;
A similar arrangement has now being extended beyond central Government Departments to our State Agency Sector to include the Health Service Executive, the Local Authorities, State Agencies, and all other Public Sector Bodies, (with the exception of the Commercial Semi-State bodies). These new arrangements apply in respect of valid invoices received on or after 01 July 2011.
The most recent set of composite figures published are for Quarter 1 2013 and show that 92% of Government payments, valued at €468m, were paid to suppliers within 15 days. The Quarter 1 2013 returns also shows that 91% of Agencies’ payments, under the remit of my Department and valued at €28.3m, were paid to suppliers within 15 days. The Late Payment Directive which established EU law in the area of prompt payments was originally introduced in 2000 and was recast in 2011 to modernise the law in this area. The Recast Directive (2011/7/EU) came into effect across the EU on 16 March 2013. The issue of prompt payment is now covered in Irish law by the European Communities (Late Payment in Commercial Transactions) Regulations 2012 (S.I. No. 580 of 2012).
This legislation will act as a deterrent to late payment and as a driver for payment on time by establishing a clear expectation in law that payment will be made according to agreed terms. It lays down the specific deadlines for the payment of invoices and establishes a right to compensation in the event of late payment in all commercial transactions, whether they relate to transactions between private or public undertakings, or between undertakings and public authorities.
The Action Plan for Jobs 2013 contains commitments in respect of a Code of Conduct on Prompt Payments to improve cash flow for business and to take steps to enhance awareness of the need for prompt payments by all elements of business. Minister Perry recently announced agreement for the text of a Code of Conduct on Prompt Payments aimed at improving cash flow between businesses. The Code of Conduct is being developed by the Business Representative Bodies in Ireland with the support of the Department of Jobs, Enterprise and Innovation. Signatories to the Code will undertake to:
- Pay suppliers on time, within the terms of contract and in accordance with legislation;
- Give clear guidance to suppliers on payment procedure; and
- Encourage good practice by promoting adoption of the Code.
Prompt payments legislation serves as an important mechanism that can help to improve cashflow for businesses. 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, represents significant progress on the issue of prompt payments in Ireland in 2013.