The average payment is now made around 23 days beyond agreed terms and one in four companies fails because of this. At a time when businesses should be investing in innovative new products, services and staff, they are instead spending time chasing payments and that is simply unacceptable.
The government, as a major customer to many small companies, must lead by example. Central government departments currently pay nine out of 10 invoices within 10 days, settling £66bn worth of bills more quickly. It's a good start but there's still more we can do.
I am extremely pleased the regional development agencies have now signed up to the prompt payment agreement, but still only a third of councils have pledged their support. The government has a duty to ensure that the entire public sector is paying on time, including local councils and the NHS.
The average payment is
now made around 23 days
beyond agreed terms and
one in four companies fails
because of this. That is
simply unacceptable
now made around 23 days
beyond agreed terms and
one in four companies fails
because of this. That is
simply unacceptable
My colleague Shriti Vadera recently held a meeting with some of the UK's leading private companies to persuade them to come on board. We now have 13 FTSE100 companies, including big names like Shell, British Gas, Barclays and GlaxoSmithKline, signed up to pay according to agreed terms through the Institute of Credit Management's prompt payment code. I challenge every responsible company to sign up to the code; surely no one can baulk at paying according to the terms agreed with suppliers?
These additional 13 companies now bring the total committed to the scheme to 209, which is a good start but proves that we have a very long way to go if we are to rise to the challenge of these extraordinary times.
Our role is clear: we must get as many large companies with substantive supply chains to sign up as we can and this is a challenge I am very passionate about. We must continue to champion the benefits of prompt payment to all companies: establishing a reputation as a good customer, getting access to better deals, discounts for paying promptly and positioning themselves as a priority customer when supplies and services are in demand.
We have been fortunate that the UK's leading business organisations, including the Federation for Small Business, the Institute of Directors and the British Chambers of Commerce, have been so supportive. They can play an important role in providing leadership to their members as well as ensuring that UK business has the advice and skills it needs to manage its customer relations and cashflow.
We also supported the Institute of Credit Management in creating a series of guides, covering the full range of issues from knowing your customer through to taking legal action to recover bad debts. To date, over 70,000 have been downloaded since their introduction in November.
One of the main problems a recession brings is its ability to undermine people's confidence: suppliers fear they won't be paid, consumers are concerned that companies will go bust and investors are worried about losing money. By ensuring good business practices in the form of prompt payment and making sure businesses can access the funds they need, we can begin to restore confidence in the UK market.
