Today are Chief Executive Phil Orford is quoted in a Daily Telegraph story criticising certain aspects of the Prompt Payment Code.
For those of you who don’t know, the Code – usually referred to as the PPC – is a charter for big business on how to fairly treat their suppliers when it comes to payment. Those firms who sign it agree to a raft of terms, but notably absent is a pledge to pay ‘promptly’.
Which is a pretty big omission for something with the name ‘prompt’ in its title. We think the PPC is a great tool to encourage the ethical treatment of suppliers, but it needs to be tightened up because certain big businesses are abusing it at the moment.
Unilever – maker of famous brands UK brands such as Helmann’s, Bovril, PG Tips, Chicken Tonight (the list goes on, and on) – increased their supplier payment times to 90 days from 60 in 2010, just as the UK came out of the first recession. That must have really helped their suppliers in tricky times.
So imagine our surprise when they confirmed to us this week that they were planning to sign the PPC. Does anyone seriously think 90 days is even remotely ‘prompt’?
Allowing a firm with these payment times to sign undermines the spirit of the PPC, even if it is not technically breaching the existing eligibility requirements required for firms to join. Sainsbury’s are also planning on signing despite having just increased their payment terms in October.
We feel big businesses are cynically using the Prompt Payment Code to boast their ethical credentials to the wider public, when in fact they are anything but to their suppliers, and are hoodwinking the public for their own PR purposes by signing.
The small firms who supply them certainly see no change to cripplingly long payment times.
Business Minister Michael Fallon is set to publicly name and shame exercise all FTSE 350 companies who have refused to sign the PPC later this month. The threat of this will no doubt see a number of big names scrabbling to sign to avoid some bad PR.
But if these firms aren’t prepared to decrease their payment terms to acceptable levels then quite frankly, what’s the point them signing? It would be a meaningless, self-serving gesture, and we hope the public can see this.
We think that standard net monthly, that is payment on or by the end of the month following the month of invoice, is more than ample time to settle up. Our own research last year showed in fact most local councils are paying in under 30 days, with many in under 10 days, so if notoriously inefficient local governments can cough up this fast, we see no reason why big business can’t.
Certainly, those that have painfully slow payment times should not be eligible to sign the PPC.