Time to act against slow payers
A piece in the Money Section of the FT on Saturday quoted a number of small business owners who described the Government's Prompt Payment Code as mere window dressing. One even mentioned that one of the large companies signed up to the prompt payment scheme was one of their worst payers! Of course, one of the big drawbacks of the scheme is that it is voluntary. Full marks to the ICM and the government for raising awareness of this serious issue, but will it ever make a difference? I very much doubt it. But then again, will Government ever come to the rescue of SMEs who suffer tremendous cash flow difficulties because of the greed of the big corporates with muscle.
I think it's time for the Government to act against large private organisations who find it difficult to forgo the obvious advantages of holding on to money that belongs to someone else i.e.smaller suppliers. Why should large organisations be able to unilaterally impose 90 days payment terms on suppliers when they demand their own invoices to be paid within 30?
How about this for an idea. Government can appoint inspectors to do spot checks within the purchase departments of large organisations to check on the DPO (Days Purchases Outstanding). If the figure looks particularly high, given that most business impose 30 days credit terms, a random check on some real invoices within the department can be undertaken. Penalties could be imposed for any wrongdoing. These things within a finance department would be very difficult to hide away from an inspector, so the spot checks should be very straightforward to achieve. Good idea or bad idea? I'd like to know your thoughts.