GOVERNMENT plans to ‘name and shame’ late business payers will be unworkable unless backed by legislation, warns a leading Sheffield credit expert.
“Asking small businesses to blow the whistle on their major customers is naive, impractical and unrealistic,” says Laurie Beagle, divisional director of P&A Receivables Services Plc, following an announcement from Cabinet Office minister Francis Maude that the Government wants to name large contractors who fail to pay their suppliers on time.
P&A’s own survey of 540 credit and finance professionals shows that more than two-thirds of leading international and UK suppliers are being paid late by their customers with some companies paying as late as 120 days.
“An existing voluntary code of conduct brought in by the previous Government has proved to be a resounding failure with our own survey showing that the culture of late payment is escalating. We need industry and government to work together on developing legislation to stop this trend before it becomes part of the fabric of UK business culture.”
Mr Beagle, divisional director of P&A Receivables Services Plc, worked with Sheffield Hallam University Business School to survey 540 credit and finance managers from manufacturing, distribution and service companies.
Seventy per cent said that their customers had paid them late over the last 12 months – with more than half of those (53%) saying customers were paying more than 15 days late.
Some 57% had received requests from customers to change payment terms – some demanding up to 120 days’ credit.
“Thirty days’ credit is the norm in around 80 percent of companies yet major buyers in a wide range of sectors are telling their suppliers that they are now going to pay on 60 days,” said Mr Beagle.
“In the last week I have heard of a number of very well-known companies demanding payment terms of 120 days. In another case a major retailer insisted on 90 days payment terms. One of their larger suppliers threatened to walk away but a smaller supplier had to accept these new terms.”
The companies surveyed on their views on payment terms and business risks include global household names in IT and manufacturing. Many businesses who took part are members of international credit forums chaired by Laurie Beagle.
“I’ve heard forum members refer to bully boy tactics from some of their bigger customers. Large suppliers may be able to stand firm against such requests but smaller companies are being held over a barrel and it is costing them money. Such demands could even see smaller companies having to cut jobs or worse, close down the business.”
Businesses who took part in the survey include Marshalls, the UK’s leading manufacturer of stone and concrete landscaping products; Ingram Micro Inc, the world’s largest technology distributor and ASD metal services, the largest independent multi-metals stockholder and distributor in the UK, and a key member of the Klöckner & Co Group.
P&A Receivables and Sheffield Hallam University plan to carry out the survey annually.
To view the results in full, go to www.thepandagroup.co.uk/credit-risk-survey.