It’s about time the government actually required big businesses to speed up payments to small suppliers rather than just relying on voluntary measures.
The Payment Practices Regulations were introduced to do this but they seem to have been forgotten. The reporting appears largely ignored by big business and the enforcement measures seem to have evaporated. Was anyone actually fined under this regime?
With the Government estimating £23.4bn worth of outstanding late invoices, action is essential. Despite the voluntary status of the UK’s Prompt Payment Code (PPC), I welcome the news that large businesses have been given less time to make payments to smaller suppliers as a move in the right direction.
Those businesses that volunteer to sign up to the scheme now face adverse publicity if they fail to keep their PPC commitments. The government now pledges to publicise the names of signatories found in breach.
Could 2021 be the year that late payment offenders are caught out for their misconduct? I remain a little skeptical.
From our own research we know that 67% of UK finance decision-makers said their team must consistently chase suppliers to request copies of supplier invoices. Late payment causes real hardship to small businesses, and the issue is more prominent than ever due to the continued impact of the pandemic.
Despite my cynicism about the voluntary approach, there are ‘big businesses’ out there leading the way. Recently, supermarket chain Morrisons extended its scheme to provide immediate payment times for small suppliers. Whilst headlines billed this as a “cost” of £60m to Morrisons, for us pedantic accounting professionals this is not a cost, but one time cash flow, an investment, which required funding.
If they stop the policy, this one-time impact on cash flow will reverse taking money from suppliers and putting it back into their coffers. This might prove neither to be a good investment or public relations decision.
The benefits to revenues and profits from the goodwill created with small suppliers could prove to make this “investment” of £60m in the supply chain a very good choice. Further ending poor payment practices will be fundamental in helping smaller business play their part in driving economic recovery which in turn will benefit big business.
Ian Smith, Finance Director and General Manager, Invu