All public bodies in receipt of taxpayer's money should be signed up to the Prompt Payment Code, a Conservative MP has said.
Stephen Metcalfe, MP for South Basildon and East Thurrock, said it would be an effective zero-cost way of providing a boost to the economy, during a debate on the subject on 8 November 2012.
The code is administered for the Department of Business, Innovation and Skills by the Institute of Credit Management. It demands payment of suppliers on time, giving clear guidance to suppliers and encouraging good practice.
Opening the debate, Mr Metcalfe said late payments strangled small businesses which relied on money coming in to pay their staff and bills.
He said "billions" of pounds were being withheld from the economy by some of the organisations who have the "deepest and largest pockets".
"Why are they withholding these payments? I don't know - whether it is malice, poor practice or efficiency, whatever the reason is, this must change."
Labour MP Debbie Abrahams said Sainbury's supermarket had lengthened its standard payment time to 75 days, and called for a boycott for not signing up to the code.
For the government, David Willetts said: "We absolutely understand that when we talk about finance for business and we have endless ingenious schemes for encouraging bank lending and access to finance from the city, one of the best forms of financing business is just to win contracts and get paid for them.
He said a change in the "culture" of late payment was a "challenge" and needed both government and business to "play their part".