Introducing our Guest Blogger for this week …. David Thornley. David is Group Credit Controller at Fort Vale Engineering and is a member of the Executive Committee and Advisory Council of the Institute of Credit Management (ICM). So in economic times where cashflow is tight, who better to tell us all about the new Prompt Payment Code.
Beyond league tables and batting averages, I do not possess the kind of mind which is given to retaining and analysing statistical information. But one statistic which appeared on my radar recently struck a chord with me. That is, that late payments have recently reached a record high of £36.5bn.
It is easy to be casual when confronted by such a figure, after all, most of us are incapable of visualising such an amount. Yet within that statistic dwells very real stories of businesses forced under; livelihoods lost and businesses unable to make ends meet due to the weight of invoices still to be paid by customers who have the means, but lack the will, to pay on time.
During the course of a long career in Credit Management, I have encountered any number of Financial Directors or Company Accountants who brag about the fact that they delay paying their suppliers for as long as they possibly can. They relate this practice to hard-nosed management.
The Institute of Credit Management, an organisation to which I am proud to belong, take a different view, and thankfully, now, so do the Government in the person of Michael Fallon MP, the Business Minister, who – along with other MP’s – has joined the ICM in condemning the practice of late payment of invoices and is actively encouraging, cajoling, and (where necessary) threatening large organisations to mend their ways in this regard.
The ICM’s “Prompt Payment Code” encourages businesses to commit themselves to the prompt payment of their suppliers. It is easy to sign up to (see www.icm.org.uk and follow the links); takes little time, but demonstrates a company’s commitment to moral and ethical treatment of suppliers.
Sadly, take-up amongst the country’s largest and most dominating organisations has been sluggish. Attempts to engage FTSE 350 companies has been frustrating: meeting – at best –indifference and –at worst –refusal. In between we have been met with a core of companies who think that imposing 90 days terms on their suppliers (which are then arbitrarily extended without prior consultation or notification) does in fact equate to prompt payment.
Try applying for a loan from your bank, and then dictating to them as to how and when you will repay it. You are unlikely to succeed. Why then should businesses assume that their suppliers – from whom they are effectively receiving a loan in the form of goods and services on credit – should be treated any differently?
Many thanks to David for his forthright views on the merits of the Prompt Payment Code. We would love to hear your comments on this issue and if you want more information about the Prompt Payment Code see www.promptpaymentcode.org.uk or go to the ICM website referred to above to sign up.