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Tuesday, February 09, 2010
Tuesday, February 09, 2010
Latest Procurement News
Posted: Monday, September 28, 2009, 8:42AM
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KNOWLEDGE MANAGEMENT TAGS
"Supplier Relationship Management"
Late payment hitting UK small firms' supply chains
Late payment and the consequent poor cash flow is the 'key issue' affecting small firm in the UK, new research reveals.Almost a quarter (23 per cent) of respondents to a survey conducted by the Forum of Private Business (FPB) indicated that late payment was top of their list of current problems - more than those who voted for a lack of sales (20 per cent), and complying with health and safety regulations (11 per cent).
In all, 42 per cent of FPB members who took part in the survey reported a deterioration in prompt payments from customers - typically bigger businesses - compared to just 3 per cent who said there had been an improvement. A total of 56 per cent said there had been no change from previous months.
The FPB, which 'names and shames' poor payers in its Late Payment Hall of Shame, is working with the Government to find solutions to payment problems, including encouraging companies to sign up to the 'Prompt Payment Code'.
"Small firms' cash flow is being decimated by credit restrictions and declining trade. Our research suggests that poor payment, which has always been a problem, is now threatening the very survival of many businesses," said Phil Orford, the FPB's Chief Executive.
"We want the UK's biggest companies to take the lead and pledge to pay their suppliers on time by signing up to the Code in order to set in motion a consensus of prompt payment right down the supply chain."
Even declining bank lending was deemed to be less of a concern than poor payments. The banks' tardy decision making was the major issue for six per cent of respondents, and the steep cost of bank lending the major concern for four per cent.
Orford pointed out that, already, under the Late Payment of Commercial Debts (Interest) Act 1998, small businesses have a Statutory Right to Interest (SRI), meaning they can in theory charge for late payments. However, few take advantage of this or are prepared to speak out publicly out of fear that large companies will simply take their business elsewhere.
In addition, many larger companies impose unilateral changes on their smaller suppliers' terms and conditions, often mid-contract and with little warning, effectively sidestepping the redress provided by the late payment legislation.
"Suppliers receiving underpayment on deliveries made under contracts agreed before the date of any letter notifying them of a change in terms and conditions should know they are automatically be entitled to interest under the terms of their original contracts or under the LPCD(I) Act," said Stuart Blake, the FPB's adviser on Late Payment.
"What is more, if their entitlement stems from the LPCD(I) Act, they will be entitled to a late payment penalty charge as well, assuming their contract postdates August 2002."
"Suppliers should be careful about fulfilling orders received after this letter was sent, since to do so may indicate acquiescence, and therefore 'acceptance', of the new terms the letter seeks to impose."
He added: "The current process for recovering such debts is both expensive and cumbersome, being based on systems designed for the resolution of disputes and legal complexities rather than the simple administrative task of recovering uncontested debts.
Procurement Tag - Supplier Relationship Management
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