The Chief Executive of the Chartered Institute of Credit Management Philip King has given a cautious welcome to the Government’s call for evidence in tackling late payment but warned against actions that may ‘throw the baby out with the bathwater.’ King says that while the possibility of increased powers for the Small Business Commissioner (SBC) is logical, the suggestions of fines and sanctions for transgressors will need further consultation and thought, especially as regards to how any ‘punishments’ will be enforced.
He also says that proposals to encourage SMEs to better utilise payment technology lack any detail as regards what type of technology is being proposed and how such technology will be funded.
King said “Much of what is included in the document from the Department for Business, Energy and Industrial Strategy (BEIS) is aspirational, and while those aspirations should be welcomed, it will be the detail that is now important.”
“David Cameron encouraged Supply Chain Finance when he was in power, but the problem is that current Payment Practices Reporting (PPR) can potentially penalise businesses for offering it, so this will need further consideration. It will need to be very clear what the benefits are and how they can be maximised whilst mitigating the risks.”
The call for evidence references the Prompt Payment Code, and says the government will consult on how the Code could be further strengthened. It also proposes a tougher approach to PPR: “The CICM is already working closely with the Small Business Commissioner and has long advocated the concept of transferring responsibility for the Code to the SBC in a phased approach.”
“Since our remit changed to publish the names of those suspended from the Code, businesses, politicians and the media have at last been able to see how the Code is both a carrot and a stick in driving positive payment behaviours. If the Code has struggled in the past, that has been principally down to lack of funding and a failure to understands its true purpose and its powers.”
In terms of PPR, King says it is already a criminal offence for businesses not to meet their statutory reporting obligations, so again this will come down to enforcement: “Obliging larger firms to appoint a member of the Board with specific responsibility for late payment will support this and help late payment and the treatment of suppliers to move further up the Boardroom agenda.”
King welcomed the measures and proposals overall: “If adopted in the right way they can help drive the change in culture that has been the objective of so much of our work in this area for many years. We need government to turn words into the right actions, and we need to continue to highlight that good credit management sits at the centre of so much of what is required to change that culture.”