A SHEFFIELD-based debt expert is calling for laws to force companies to pay their bills on time after a survey showed a Government-backed voluntary code isn’t working.
Laurie Beagle, divisional director of credit management and debt collection business P&A Receivables Services, worked with Sheffield Hallam University Business School on the survey of credit and finance managers from manufacturing, distribution and service companies.
He says the late payment culture has got worse despite the last government’s introduction of the Prompt Payment Code.
“It is quite clear that the voluntary Prompt Payment Code is not working and that we need legislation to make businesses pay their suppliers on time,” says Mr Beagle.
“I knew that requests for extending payment terms were increasing but I had not expected to see such a high volume of late payments or so many demands for extended payment terms.”
Many businesses who took part are members of international credit forums chaired by Mr Beagle.
“I’ve heard forum members refer to bully boy tactics from some of their bigger customers,” says Mr Beagle.
“Large suppliers may be able to stand firm against such requests but smaller companies are being held over a barrel and it is costing them money. Such demands could even see smaller companies having to cut jobs or worse, close down the business.”
P&A Group managing partner, Jeremy Priestley, adds: “The survey results reinforce what I am hearing when I talk to SMEs and my own friends in business – everyone is complaining that they are not being paid on time.
“Cash is tight and big companies are hoarding cash to bolster their balance sheets.
“It’s a vicious circle for SMEs – if they push too hard they lose their customer but if they accept the terms they could put their entire business at risk.”
Seventy per cent of survey respondents said that their customers had paid them late over the last 12 months, with more than half saying customers were paying more than 15 days late.
“Thirty days credit is the norm in around 80 per cent of companies yet major buyers in a wide range of sectors are telling their suppliers that they are now going to pay on 60 days,” says Laurie Beagle.
“In the last week I have heard of a number of very well known companies demanding payment terms of 120 days.
“In another case a major retailer insisted on 90 days payment terms. One of their larger suppliers threatened to walk away but a smaller supplier had to accept these new terms.”