A business lobby group has said that a number of high profile companies are increasing the pressure on their small suppliers by delaying paying bills by up to four months.
The Federation of Small Business (FSB) added two more names – building supplier Jewson and food producer Bernard Matthews – to its ‘Name and Shame’ list of firms which it considers to show poor late payment practice.
Jewson has told some of its suppliers they will have to wait 60 days for bills to be paid and be charged a 10% fee for settlements made within the period, while Bernard Matthews has also extended payment terms to 60 days.
Amazon, DHL, Carlsberg, TNT and Compass have also been criticised for making suppliers wait prohibitively long periods for settlements.
The FSB is recommending that businesses and agencies to sign up to the government-backed Prompt Payment Code and wants Companies House to be given powers to name, shame and fine late-payers.
The forum said it had written to companies explaining the impact late payment can have on the cashflow of smaller organisations.
Chairman John Wright said: "Poor payment practices in both the public and private sector can drastically affect cashflow for small firms at a time when business owners are doing their best to hold on to precious funds.
"Larger organisations must be given a loud and clear message that they must stop using the recession as an excuse to use small firms as source of credit.
"The FSB would like to see as many private and public sector organisations as possible signed up to the Prompt Payment Code to ensure we can put an end to this plague and change the culture of late payments for good.”
The lobby group hosted an "economic summit" in London yesterday, attended by politicians and business leaders, which aimed to "change the damaging culture of late payments".
The FSB’s announcement came on the same day as an academic study was released which suggested that legislation intending to help small businesses punish late payers is instead being used against them by large companies seeking a reward for settling bills promptly.
Legislation introduced by Labour in November 1998 meant that companies with 50 employees or fewer have been able to claim interest 8 points over Bank of England base rate if their customers fail to settle bills on time under the Late Payment of Commercial Debts Act. These powers were extended to companies of all sizes in November 2002.
However, researchers at Leeds University Business School found that 20% of companies it interviewed said the interest charge was being used as an excuse for customers to demand a discount for paying ‘early’.
© Crimson Business Ltd. 2009