The Department for Business Innovation & Skills (BIS) is launching a new initiative to promote wider cooperation between businesses and suppliers so that payments are received on time.

The drive will provide information supported by a new backbone group of business representatives who will examine the issues behind late payment - an increasing problem that particularly threatens small and medium sized enterprises (SMEs) who are unable to survive resulting cashflow difficulties.

Guidance and support will also be offered to businesses struggling with late payment disagreements and will be backed by organisations such as the Forum of Private Business (FPB) in the hope that business performance will be boosted.

The use of electronic invoicing, automated processing and instant transfer and verification of invoices are some of the suggestions given to discourage the practice of delayed payment. Key points in the Government's campaign also include encouraging SMEs to:

• Sign a contracted pay agreement with suppliers before delivering orders.
• Agree to best practice regarding payment by signing the Government's Prompt Payment Code.
• Use legislation to pursue firms who put them at risk by delaying payment.
• Seek redress if they are not paid.

Business and enterprise minister Mark Prisk announced the new initiative as part of the Finance Fitness campaign, saying: "It is hugely important that all businesses, particularly small firms, establish clear payment terms to ensure they get paid on time and successfully manage their cashflow.

The Government is already setting a strong example by paying 80 per cent of invoices within five days. What's more, we have secured the agreement of business representative bodies to come together and establish a prompt payment workshop, to explore these issues more fully and develop business-led solutions. We must continue to promote prompt payment to ensure our small businesses can thrive and grow."