22 July 2011
Government plans to 'name and shame' late payers is impractical, unworkable and yet another missed opportunity.
More than this, it appears to chase a headline rather than address the fundamental issue that should be focused around up-skilling businesses and giving them the tools to better understand the value and importance of best credit management practice.
The comments, from Philip King, Chief Executive of the Institute of Credit Management (ICM), follows a warning from Francis Maude, a Cabinet Office Minister, that the Government will name and shame prime contractors who fail to pay suppliers within a 30-day limit.
Mr King says that such a mechanic already exists via the Prompt Payment Code, but the Government is still not doing enough to promote its existence: "The Code was established by the Department for Business, Innovation and Skills (BIS) to encourage best payment practice and by definition expose those whose behaviours might be open to question," he says.
Whereas Mr King believes that the Government is well meaning, and a statutory 30-days may work in certain industries, he is concerned that the next step may be a mandatory 30-days for all. He is also doubtful that shaming businesses into changing their payment strategies will work: "It is a complete non-starter," he says.
"A farmer providing milk to a dairy needs to be paid in days, not weeks," he says, "and is not going to be helped by such thinking.
"Conversely, industries such as engineering and aerospace have such complicated terms and conditions attached to long-term contracts and deliverables that a mandatory 30-days is clearly unworkable. It is the certainty of payment that is the issue, and being paid to appropriate, agreed terms."
Mr King is also worried as to the arbiter of what constitutes good and bad practice, and who is worthy of 'shame': "Who is going to say that one business is bad for apparently paying late, when the fault could lay at the door of the smaller supplier for failing to get basic invoice details correct," he says.
"Actually, the focus should be on getting the smaller suppliers to invest more and understand more about the importance of their own credit management practices, and this is where we believe the Government should focus its energies and we are able to assist."
As well as the Prompt Payment Code, other initiatives managed for BIS by the ICM include a series of Managing Cashflow Guides, of which almost a quarter of a million have so far been downloaded.
"We have to move away from the rhetoric and take a closer look at the excellent practical support that is already available through BIS," he concludes.
"The Government could be more joined up and consistent in its communications and do more to promote and endorse the work of its own departments," he concludes.
