Public sector prompt payment is making a real difference to business cash flow, Lord Davies said yesterday. But the Minister for Trade, Investment and Small Business challenged both big business and suppliers to play their role to ensure prompt payment. Better invoicing, customer relationship management and prompt payment build confidence throughout supply chains.
UK Payment Data
Nineteen out of twenty central government invoices are now paid within ten days – an improvement of 24 percentage points since November 2008. £73 billion has been paid to business within ten days by central government since June 2009.
The wider public sector has also seen improvements in payment performance. The Forum of Private Business reported this month that the average payment time for local authorities in England is now eighteen days, with 42% of all invoices paid within ten days.
Latest data collated by Experian shows that UK payment periods are now the shortest recorded since April 2008.
Big Business Challenge
However, Lord Davies challenged the private sector to make stronger efforts to support small businesses in the current economic climate by ensuring swift payment. Twenty-two of the FTSE 100 have so far signed up to the Government’s Prompt Payment Code, launched by Lord Mandelson in December 2008. They are joined by over 640 other signatories, all committed to ensuring they pay suppliers within agreed terms.
Writing to the FTSE100 companies not yet signed up to the Code, Lord Davies said:
“Late payment creates uncertainty in the supply chain and carries a significant cost to UK business. In 2009 it is anticipated that UK business will pay approximately £180 million in interest on overdue payments. That’s £180 million of potential investment lost. Being a Code signatory sends a very simple but very powerful message – we pay on time.”
Challenge to Suppliers
Analysis of supplier invoices held by Experian indicates that suppliers can help improve speed of payment themselves by invoicing correctly and on time. All too often the basics of good business are missed and perfectly profitable companies fail. Over 100,000 copies of the Institute of Credit Management’s Managing Cash Flow guides have been downloaded this year. The guides provide a quick reference to the basics of customer, invoicing and cash flow management.
Lord Davies added:
“Visible leadership on prompt payment by Government and our most influential companies is important to small business. Government is playing its part - but every part of the supply chain must help ensure prompt payment.”
Matthew Goodman, Policy Representative at the Forum of Private Business (FPB):
“With FPB members in almost every level of the supply chain, we understand how vital it is that the message gets out about how paying late can harm struggling suppliers. Keeping cash flowing is the biggest concern for many small- and medium-sized businesses, and logically, best practice should start at the top of the supply chain. That is why we believe that the FTSE 250 should demonstrate their leadership in the market and become signatories to the Prompt Payment Code.
“Just as important, though, must be the support for those small businesses who are most affected by late payment. A busy business sometimes has trouble with the basics - checking out potential customers, invoicing on time and chasing payments - which can pushes up their costs and lead to a greater reliance on finance. That's why we are working to make sure that there is protection and better training out there for businesses struggling to keep track of their cash-flow."
Philip King, Chief Executive of the Institute of Credit Management:
“The importance of prompt payment as a central part of ‘treating customers fairly’ cannot be overstated. It is paramount in maintaining a healthy and productive relationship between customer and supplier, and it is most encouraging to see the first tangible signs that the government’s initiatives with the ICM are beginning to bear fruit.”
The Code is just one of a number of Government measures aimed at establishing a better payment culture and follows on from a commitment made by the Prime Minister in October to pay all central Government suppliers within ten days.
Details of those businesses and organisations signed up to the code can be found here.
Details on how to sign up to the code can be found here.
The research shows that many suppliers get the basics of invoicing wrong and that this frequently leads to payment delays. The Department for Business, Innovation and Skills, in partnership with the Institute of Credit Management and the UK’s leading business representative organisations, has developed guidance to ensure your suppliers are best equipped to invoice correctly and on time. These guides can be found here.
