Here's a question to start the week with. What do the British
Printing Industries Federation, the Federation of Master Builders,
the National Pig Association and the British Home Enhancement Trade
Association have in common? On the face of it probably "not a
lot". But before you risk spending the entirety of this Monday
morning trying to guess the answer, allow me to put you out of your
misery.
And joking apart, the answer actually relates to a deadly
serious business issue, as all these organisations recently
confirmed themselves as signatories to a letter delivered by the
Forum of Private Business to Mark Prisk MP, the Minister for
Business & Enterprise, demanding more Government action to
address the problems posed to UK firms by the late payment of trade
invoices.
Let's be clear, late payment is a corrosive trend which can
drive companies out of business. Statistics reporting the woes of
company owners who cite it as the major drain on their cashflow are
plentiful and many companies (with large corporates including
supermarkets often being the guiltiest parties) seem to think it
perfectly normal and acceptable to fail to pay suppliers on time or
in full, as well as change their payment terms unilaterally,
without bothering to consult with their suppliers.
All of which is great for company bean counters who get to sit
on interest-earning cash for longer but bad news for suppliers who
need to meet their own financial commitments, including paying
their own suppliers as well as meeting wages and general business
overhead commitments. It is worrying that 20 per cent of UK
credit managers polled in a recent Graydon UK survey believed late
payment could threaten their company's ability to trade during
2012.
But what of the existing legislation I hear you cry? The Late
Payment of Commercial Debts (Interest) Act 1998, updated in 2002,
is grandly titled and well-intentioned but in practice it's utterly
ineffective. When it comes to the crunch, small firms are reluctant
to speak out against large companies for fear of order cancelling
reprisals. The regulatory framework needs tightening and the
measures suggested by the Forum of Private Business and their
partners (including Graydon UK), including the requirement of FTSE
companies to report more detailed information on their payment
times, and a clamp down on those firms taking 'prompt payment
discounts' and imposing retrospective changes to payment terms are
crucial to redressing the balance.
The Government seems willing to help. The BIS Finance Fitness
campaign is a good thing. And today that same department is working
to raise the media profile of the importance of paying on time.
It's great to see but this momentum needs to be sustained.
Companies like ours are working hard to counsel clients on
unlocking growth opportunities by identifying and engaging new
trading partners. Our job will be easier in this respect if the
payment playing field is driven by fair play.
(ws)
