Prompt Payment - A New Moral Code?

The Government’s Prompt Payment Code focuses on three main areas: a commitment to pay suppliers on time, give clear guidance to suppliers, and encourage good practice. Many large companies have signed, or have committed to sign up to it.

Unfortunately, according to the Federation of Small Businesses, other commercial giants, including Carlberg, TNT, DHL, Compass, Bernard Matthews, Jewson and Amazon have chosen to extend their payments terms – one company is keeping its suppliers waiting for as long as four months before paying invoices, and others are charging settlement fees as a discount if accounts are paid prior to the date specified by their extended terms – in order to hold onto cash, despite the impact this will have on the cash flow of small businesses, or the increased costs those businesses will incur in respect of bank charges, overdrafts, and handling fees.

Legislation giving suppliers the right to charge interest on late payment has failed to solve the 'big-customer-small-supplier' late payment problem. Small suppliers fear to use it because they fear that the defaulting customer will find another supplier; large customers regularly refuse to pay late payment charges when they are demanded, using the often unspoken but always potent threat that they will find another supplier. I think it unlikely that the non-compulsory Code will succeed where Legislation failed.

Philip King, the Director General of The Institute of Credit Management, recently wrote that the only real answer would be a new moral code – ‘a code that says late payment is not acceptable’ – and he is, of course, quite right. Unfortunately, I doubt that we will see universal adherence to such a code any time soon. Certainly many large companies are interested in promoting their ‘corporate social responsibility’ credentials – it gives them a competitive advantage – but ‘prompt payment’ doesn’t necessarily form part of every company's CSR thinking, or appear on every CSR statement.

You can learn more about the Prompt Payment Code by visiting the Prompt Payment Code website. There is a facility on the site to raise concerns about late payers.

Cutting Down on Staff - or Cutting Off Your Nose to Spite Your Face?

Experienced credit personnel are more valuable than ever in the current climate, but many businesses are looking to cut costs by cutting down on staff, and a survey by The Institute of Credit Management has raised fears that it is smaller businesses that are primarily responsible for the highest number of redundancies where credit personnel are concerned.

I am a great believer in DIY, but frankly professional credit managers - who are, after all, responsible for keeping the cash flowing - are the last employees that anyone should think of getting rid of in order to cut costs.

Philip King, the Director General of the ICM, remarked that "It seems illogical that companies are seeking to make redundant those professionals who could be their very salvation".

He's right, of course - and if you substitute the word 'mad' for 'illogical' then you'll have my opinion in a nutshell.

The Sports & Social Club That Wasn't

The liquor trade is a highly competitive industry, and there was a time - and not so long ago either - that major breweries would give loans to almost anyone for almost anything to get their beer into an outlet, and their sign over somebody’s front door.

And it wasn’t just money that breweries were prepared to hand out against barrelage discount or any other kind of loan. Breweries would supply tables and chairs, banquettes, curtains and billiard tables as well as beer - which is how I came be to be involved with The Willow Sports & Social Club.

According to the documents that landed on my desk one unhappy morning, this apparently thriving establishment had benefited from everything a major brewery had to offer – money, furniture and beer. And then it's 'owners' had unaccountably dropped out of sight.

I called: no one answered the telephone - day or night. I wrote: no one answered my letters. There was no response to the Writ I issued, nor to the Judgment that inevitably followed. Finally, I applied for a Warrant of Execution – and by that time accrued interest had added a considerable sum to already large amounts due for the loan, the furniture, and the beer.

I have read a great many Sheriff’s Reports in my time, but I am happy to say that I have only one read one like that which related to The Willows Sports & Social Club.

The premises proved to be a Nissen Hut in the middle of a field surrounded by a chain-link fence. There was a gate – padlocked – which in due course was opened by a locksmith. There had once been a road of sorts leading to the hut, but nature had so encroached into its fabric that it was difficult to distinguish the road from the surrounding meadow. The hut itself was, of course, empty and derelict. No furniture. No curtains. No billiard table. And no cellars nor any sign of a bar…

There was never any question of what happened to the money. It went into a bank account, from which it was very swiftly removed into another bank account, from which it was very swiftly removed into another bank account, and so on, and so on, until it finally disappeared – which came as no great surprise to me.

But the fact that they were running a Sports & Social Club did come as a very great surprise to the real owners of the premises when I finally contacted them...

It was, of course, very bad credit control all the way along the line - but that isn't the point I'm trying to make here.

I did wonder at the time – and sometimes still do wonder – what went through the minds of the people who delivered the furniture, the billiard table and the beer, and whether it occurred to them that it was really rather odd that so much furniture was expected to fit into so small a space. And even odder that there were no cellars, nor any sign of a bar...

There are a lot of articles about at the moment stressing how important it is that credit and sales personnel work as a team. Delivery personnel should be part of that equation. They have eyes and ears that are just as useful (and sometimes perhaps more useful) than the eyes and ears of the sales force, but delivery personnel won’t relay information or use their initiative unless they’re trained to be and -more importantly - made to feel that they are an important part of a team, and that their input is valuable.

Don't leave your delivery personnel out of the credit control equation.