Taking responsibility for prompt payment – a blog by Philip King
15 September 2016
Many readers of my blog will have seen the press release this week announcing the joint letter signed by Margot James, Minister for Small Business, Consumers and Corporate Responsibility, and me, to signatories of the Prompt Payment Code. In the unlikely event that you missed it there are links to both the press release and the letter on the Prompt Payment Code website that can be found here: http://www.promptpaymentcode.org.uk
The letter sets out progress in a number of areas, provides more clarity around exceptional circumstances, and outlines the timescales for the introduction of the ‘Duty to Report’ requirements. Equally importantly, it highlights challenges against Code signatories that have been ‘hugely successful in achieving fast settlement of invoices, creating dialogue between parties, improving contract terms, and providing constructive assistance welcomed by suppliers and signatories alike’.
The Code has faced frequent criticism but, away from the public glare, the administrators at the CICM work behind the scenes talking to signatories and challengers of signatory behaviour. Over the last couple of years, challenges have been raised relating to outstanding invoices totalling almost £2m, and the vast majority have been resolved or paid far more quickly than would have been the case without intervention through the Code.
Sometimes, the challenge has been about a clause in a buyer’s terms and conditions that has subsequently been removed or changed, or the imposition of payment terms that have been unfair and have then been reversed, but most have related to more simple issues.
In some cases, substantial unpaid invoices have been settled in a matter of hours once the Code brought them to the attention of a senior contact within the organisation; in others, a dialogue has been established that had not previously taken place. Typical scenarios include an invoice sitting on a desk awaiting approval while the approver was away from the office, a dispute that has not been communicated properly to the supplier or has not been dealt with by the supplier, inefficiency within the buyer’s invoice processing and payment system, or the absence of any chasing activity by the supplier.
The encouraging reality is that, as a result of our involvement, paperwork gets moved forward, conversations take place, disagreements are settled, and processes are improved. The contrasting disappointment is that insufficient challenges are raised. Small businesses say they are frightened to raise a challenge in case it is detrimental to their relationship with the buyer, but I have yet to see any evidence of this being a credible concern. We find that buying organisations welcome our intervention just as much as supplying organisations do.
Most businesses are fundamentally responsible and want to be supportive of their supply chain, not the opposite, and that’s one reason why I’m pleased to see ‘Corporate Responsibility’ included in the minister’s title and portfolio. For me, paying suppliers promptly is just as much corporate social responsibility as is turning the lights off or using less paper.
The next time a small business complains about non-payment by a customer, tell them to check if they’re a signatory to the Prompt Payment Code and, if so, raise a challenge so that we can drive the culture change faster and further.
Suppliers and buyers value our support and we need to provide more of it.