Modern CFOs must navigate two critical payment frameworks that shape UK business practices. While both focus on improving payment practices, they serve fundamentally different strategic purposes. Here's your executive comparison guide to understand when, why, and how to use each framework.
At a Glance: The Key Difference
Prompt Payment Policy = Government compliance requirement for contract eligibility
Fair Payment Code = Voluntary recognition system for payment excellence
Framework Comparison Chart
Aspect | Prompt Payment Policy | Fair Payment Policy |
|---|---|---|
Nature | Mandatory government regulation | Voluntary recognition awards |
Who Requires It | Government contractors (£5M+ contracts) | Any UK business (voluntary) |
Payment Standard | 5-day average + 95% within 60 days | Bronze/Silver/Gold tiers (30-60 days) |
Enforcement | Contract ineligibility, spot checks | Award revocation, complaint system |
Duration | Ongoing compliance requirement | 2-year award cycles |
Strategic Purpose | Revenue protection (defensive) | Market differentiation (offensive) |
Payment Standards: Side-by-Side
Prompt Payment Policy Requirements
✅ 45-day average payment time (from Oct 2025)
✅ 95% of all invoices paid within 60 days
✅ Universal application to entire supply chain
⚠️ Non-negotiable for government contract eligibility
Fair Payment Code Awards
🥉 Bronze: 95% within 60 days
🥈 Silver: 95% within 60 days + 95% SME invoices within 30 days
🥇 Gold: 95% of all invoices within 30 days
✨ Your choice of tier based on strategic objectives
Strategic Value: What Each Framework Delivers
Prompt Payment Policy Benefits
Government Contract Access: Maintain eligibility for £5M+ contracts
Risk Mitigation: Avoid regulatory penalties and exclusions
Compliance Credibility: Meet mandatory government standards
Supply Chain Transparency: Benefit from spot check visibility
Fair Payment Code Advantages
Supplier Preference: Become the client suppliers want to work with
Market Differentiation: Stand out from competitors through recognition
Stakeholder Appeal: Demonstrate voluntary commitment to ethical practices
Competitive Advantage: Build loyalty that translates to better terms
Implementation: Effort vs. Impact
Prompt Payment Policy
Implementation Focus: Systematic compliance across all suppliers
Technology Needs: Automated reporting, audit trails, spot check readiness
Resource Requirement: Ongoing operational excellence
Success Metric: Consistent adherence to fixed standards
Fair Payment Code
Implementation Focus: Strategic choice of award tier and progression
Technology Needs: Same infrastructure, different application
Resource Requirement: Voluntary excellence aligned with business strategy
Success Metric: Award achievement and supplier relationship improvement
Who Should Prioritise Which Framework?
Prompt Payment Policy Priority
Government contractors with £5M+ annual contracts
Organisations seeking government business development
Companies in regulated industries requiring compliance demonstration
Businesses focused on defensive risk management
Fair Payment Code Priority
Organizations competing for supplier loyalty and preference
Companies building ESG credentials and stakeholder appeal
Businesses seeking competitive differentiation in supplier markets
CFOs focused on offensive competitive advantage development
The Strategic Integration Approach
Leading CFOs don't choose between frameworks—they integrate both:
Foundation: Use Prompt Payment Policy compliance as operational baseline
Advancement: Pursue Fair Payment Code Awards for competitive positioning
Communication: Emphasize compliance to government stakeholders, awards to supplier markets
Technology: Implement unified systems supporting both frameworks efficiently
Timeline Considerations
Prompt Payment Policy
October 2025: Enhanced 45-day average requirement
Ongoing: Continuous compliance monitoring and spot checks
Future: Likely increasing stringency and broader application
Fair Payment Code
Now: Choose your award tier and begin pursuit
2-Year Cycles: Reapplication required every two years
Progression: Opportunity to advance from Bronze → Silver → Gold
Bottom Line for CFOs
If you're a government contractor: Prompt Payment Policy compliance is non-negotiable for revenue protection. Consider Fair Payment Code Awards for additional competitive advantage.
If you're not a government contractor: Fair Payment Code Awards offer voluntary frameworks for building supplier relationship advantages without regulatory obligation.
For maximum strategic value: Pursue both frameworks as complementary elements of comprehensive payment excellence strategy.
The frameworks work together, not against each other. Prompt Payment Policy provides the compliance foundation; Fair Payment Code enables competitive advancement. Smart CFOs use both to build payment practices that protect revenue while creating sustainable competitive advantages through supplier relationship excellence.