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“Late payment culture set at board level”, says MP ahead of supply chain bullying debate

3 min read

20 January 2015

Former editor

The Federation of Small Businesses (FSB) has assembled a group of cross-party MPs to try and uncover solutions to late payment and supply chain bullying problems.

With FSB research showing that one in five small businesses are subject to “poor payment tactics”, four core practices were identified to shed some light on the issue.

The roundtable was held at the Houses of Parliament and featured contributions from host MP Debbie Abrahams who said: “Late payment is something that CEOs and board members in big businesses can influence and I have always maintained that a late payment culture in a company is set at board level.

“That makes it a leadership issue and it’s time that deliberately paying late, finding ways to pay late, or making unilateral changes to pre-agreed contracts is seen as being as unethical as tax evasion.”

The discussion has been recently contextualised by the move of Premier Foods to levy a “pay and stay” practice – whereby they “asked” suppliers to pay a flat fee to be considered for future contracts.

Included in the FSB’s five most resented practices in use today were: the “pay to stay” flat fees; “pay you later” excessively long payment terms; “late payment” exceeding payment agreements; “one for you, one for us” discounts for prompt payment and “balance sheet bonus” retrospective discounting.

The long payment term exist despite a EU directive stipulating payment of suppliers within 60 days. However a loophole allowing UK businesses to agree longer terms if it is “not unfair to the creditor” leads to many payment windows growing to 90 or 120 days.

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MP Anne Marie Morris, who is also chair of the Small Business All Party Parliamentary Group, commented: “Our job is to make sure that it is as easy as possible to set up and run your own business, which means addressing the issue of late payment is crucial.

“The government recognises this and is using the Prompt Payment Code to commit businesses to paying their debtors on time. This is a voluntary scheme, but already has over 1,700 firms signed up. Moreover, the Small Business Bill currently going through parliament will name and shame larger companies who will not commit to this practice of ensuring a fairer payment culture.”

Also joining in the roundtable discussion were business secretary Vince Cable and FSB national policy chairman Mike Cherry.

Cherry believes it is “simply unaccepetable” for companies to exploit market position to enforce unfair and unreasonable payment terms.

“”The money outstanding in late payments is in the billions and has consistently grown larger and larger,” he added. “We need greater leadership from all parties competing to be the next government to toughen up the prompt payment code and improve the UK’s payment culture.”

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