FSB to dish out ASBOs to chronic late payers
Companies that repeatedly fail to pay their small-business suppliers on time are to be publicly named and shamed under plans announced by the Federation of Small Businesses (FSB), writes Kate Horstead.
After lobbying for stronger late payment legislation in the April Budget produced no response from the Chancellor, the business group is resorting to what it calls “a form of anti-social behaviour order” (ASBO) in a bid to shame the worst payers into settling their bills.
March figures from payment tracking firm Bacs showed that small firms are owed a mammoth £25.9 billion in outstanding payments. According to the Credit Management Research Centre, some of the UK’s biggest firms take more than 100 days to pay suppliers, compared to standard terms of 30 days.
“We’ll be giving the companies a form of ASBO by naming and shaming them, which is bad publicity for the company and therefore might stop them behaving in an anti-social way towards small businesses,” said FSB spokeswoman, Sophie Kummer.
“We’ll ask them to sign up to the Prompt Payment Code, introduced last November, and explain why late payment is a problem for small firms and warn them that we are going to have to name and shame them,” Kummer added.
The FSB estimates that 120 businesses are closing every day – with late payments by larger customers being a major cause of insolvency. It wants the Government to give Companies House more power to deal with those that renege on payments on behalf of small firms.
“A legal process costs money and takes a lot of time out of the working day, and small firms have to make the difficult decision whether to take time out or to carry on running the day-to-day business,” said Kummer.
The Chartered Institute of Purchasing and Supply’s director of professional practice, Roy Ayliffe, however, said that negotiation is the most effective way to resolve difficulties between companies and suppliers.
“Partners should be working closely together to create best value in their relationships, whether they’re a buyer or supplier, as these are tricky times we’re all living through and we all need each other,” said Ayliffe.
“Negotiation is the best way forward to reach a compromise and being aware of each other’s difficulties makes those solutions easier to find,” he added. “Small suppliers are extremely important in the supply chain, and so buyers do not always have the upper hand.”
For more information read about the Institute of Credit Management‘s Prompt Payment Code or take a look at the Late Payment of Commercial Debts (Interest) Act 1998 and the amended Late Payment Payment of Invoices (2002)