Francis Maude urges small businesses to act as whistleblowers with examples of instances where payment times are slipping, with results to be published on the Cabinet Office website.
Maude says, ‘Prompt payment is crucial to smaller companies. The government has an excellent record on paying our bills quickly and we expect our suppliers to do the same and pay sub-contractors well within the 30-day limit. When work has been done, especially by an SME, it is just inexcusable not to pay up quickly for that service.
‘We will be keeping a close eye on how the big suppliers choose to pay their sub-contractors and we won’t shy away from naming and shaming those that we find have failed to pay promptly.’
The Crown Representatives team, which coordinates the government’s approach to the management of key suppliers across all departments, will strongly encourage prime contractors to pay more quickly than 30 days.
See also: How to deal with late payment
Peter Ewen, chairman of the International Factors Group says, ‘The Cabinet Office’s plans to ‘name and shame’ late payers is a welcome step in the right direction. Our recent research among UK accountants found that many SMEs are buckling under financial pressure caused by rising supplier costs and late payment from large, corporate customers.’
Ewen adds that SMEs have huge potential to be the real engine of growth the economy needs, but squeezed margins and a lack of cashflow mean that 71 per cent of accountants say their clients have halted growth plans.
‘These businesses need to be paid on time to help them overcome working capital difficulties before they can actively pursue growth and add momentum to the wider economic recovery.’
Will naming and shaming be a deterrent to late payers?
It’s something we have seen from the government before: threats to large businesses to pay their suppliers on time, or be named and shamed.
Business minister Michael Fallon has warned big businesses that they will be publicly named if they fail to sign up to the Prompt Payment Code, a voluntary agreement to promote good payment practices.
The subject of late payment seems to be perennially on the radar of small businesses, as everyone seems to have their bad debtor issues, to varying extents.
Just recently the subject once more reared its ugly head in the form of Sainsbury’s lengthening payment terms for all non-food suppliers – many of which would already have substantial cash flow pressures to contend with without being paid even later.
Fallon’s letter, addressed to all FTSE 100 and 250 companies, urges businesses to sign up to the Code, which will be four years old in December, and warns that the names of any companies that fail to do so will be publicised in the new year.
But how effective is the threat to name and shame? Surely the fact that an increasing number of businesses are turning to the law to tackle the scourge of late payment is a sign that late-paying corporates are not been exposed enough – if at all – for their delaying.
The question is, do such companies fear negative PR enough to the extent that they feel they would lose business because of it? And does the general populace understand how critical a problem late payment is for small businesses and their survival, to warrant them boycotting offenders?
All signatories of the Prompt Payment Code are already publicly available online, but the government wants to be more proactive in highlighting companies that are not committed to the code. This movement needs to educate the public as well as denigrate offenders, and maybe then corporates will be forced to pay on time.