The subject of late payments has long been a key issue for theForum of Private Business, a self-described “proactive businesssupport organisation focused on the growth and profitability ofsmall businesses.” It publishes a “Hall of Shame” on itswebsite, which chastises those larger firms profiting at theexpense of smaller firms, usually as they unilaterally extend theirpayment schedules. Spurred in part by their lobbying efforts, theissue has become a hot topic in Britain.
Michael Fallon, the U.K. Business and Enterprise Minister, hasdeclared his intention to publicly “name and shame” major UKcompanies that fail to sign the industry-sponsored “Prompt PaymentCode” within the next month:
“Large companies are sitting on an awful lotof cash at the moment and it is simply not fair if they don’t paytheir suppliers or sub-contractors on time,” Mr Fallon said.
“That is why I have urged the largest companies to sign up to thePrompt Payment Code, which is five years old this month. I wrote toall chief executives [in the FTSE 350] back in October, since when54 more companies have signed up, half of those from the FTSE 350,but there are still many more to go. And next month I am going tolist those who haven’t signed.”
In December, a small British glazing contractor publicly announcedits intention to refuse any future business from Balfour Beatty,one of the largest building contractors in the country, on thebasis that slow and late payment of invoices was undermining itscash flow. The only unusual aspect of that story was thewillingness of the small business to go public and name names.According to Forum of Private Business chief executive PhilOrford:
“Take Sainsbury’s, for example. We exposedthem in October for increasing standard payment times to certainsuppliers from 30 to 75 days. That’s a 150pc increase. Then there’sO2, which, in December, wrote to inform its suppliers of anincrease to an extraordinary 180 days.
Asking any business to wait half a year for payment is not justmorally questionable, it’s almost certainly damaging to those onthe receiving end. Imagine the outcry, not to mention problems itwould cause for employees’ finances, if a company suddenly toldworkers, without consultation, they would have to work six months”in hand” before being paid.
The nub of the issue is big business should not be creatingartificial lines of credit at the expense of smallfirms.
Following the December story, so many small businesses contactedthe The Sunday Telegraph and The Daily Telegraph to report similarexperiences that the paper has launched what it calls a majorcampaign on the topic. A sampling of their stories are listed inlinks below; we have no doubt there will be more.
http://www.telegraph.co.uk/finance/businessclub/9782988/Government-going-to-war-over-37bn-late-payments-to-small-companies.html
http://www.telegraph.co.uk/finance/businessclub/9783119/Late-payers-strangle-small-companies.html
http://www.telegraph.co.uk/finance/businessclub/9786340/Late-payment-victims-should-speak-out-insists-NSCC.html
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/9784094/Name-and-shame-threat-from-government-prompts-FTSE-giants-to-consider-new-supplier-payment-rules.html