Company directors should be held responsible for late payment of invoices, according to a survey of supply chain managers.
The research, carried out by the Chartered Institute of Procurement & Supply, found that seven out of 10 respondents believed there should be independent oversight and stronger penalties to prevent businesses abusing their suppliers.
The survey also found that British businesses are being weighed down by a chronic culture of long payment terms and late payments, with 16% of British businesses believing most payments in the UK are paid late. Only 5% of British suppliers believe all their invoices are paid promptly.
As the UK looks beyond the EU for trade following Brexit, the data also revealed that many potential trade partners have even worse payment records than the UK. Chinese firms are reportedly the worst performing with 32% of UK respondents stating that most payments from the country were late, with the United States next at 21%. Only 12% believe most of the invoices from the EU were paid late.
Last year, new powers were proposed for the Small Business Commissioner to tackle late payments, including the power to impose financial penalties or binding payment plans on large businesses found to have unfair payment practices.
However, these measures have not come into effect and large businesses are still taking advantage of their suppliers to improve cashflow. More than half (51%) of UK companies believe large businesses in the UK force long payment terms on their suppliers because they know they can get away with it.
Malcolm Harrison, CIPS CEO, said: “While there are pockets of good practice where payment is prompt, the UK’s rotten culture of late payments is eating away at the core of Britain’s economy. We must act diligently and swiftly to protect SMEs.
“Britain’s supply chain managers are clear that cultural change can only happen when the leaders at the top of Britain’s largest companies are made to answer for their serial late payment and take positive action to tackle the issue. You would not be happy if your employer decided to not pay your wages for 90 days, so why is it acceptable for companies to treat their suppliers in this way?
“Unfortunately, late payment is not just a British issue. As the UK casts its eye further afield as a result of Brexit, business leaders and politicians should be wary of late payments from abroad harming the UK payment culture still further and creating more payment delays which trickle down to affect UK SMEs.”
Please contact us if you would like help with credit control and debt collection.
To ensure you do not miss out on similar articles and legal updates, please subscribe up to our newsletter.
