Much has been written in recent months about the unfair and oppressive treatment of ‘smaller’ suppliers by their ‘larger’ customers. Household names have been subjected to ordeal by media and some, justifiably, have been held to account.
But not all big businesses are bad. Indeed quite the opposite. Many big businesses are good, and evidence that ‘good’ by valuing and supporting the supply chain. Many are signatories to the Prompt Payment Code (PPC), managed by the Chartered Institute of Credit Management (CICM) on behalf of the government.
The PPC has been in many ways the catalyst for a debate that has grown in volume and stature. The whole issue of ‘late payment’ and how suppliers are treated is now a hot topic that many politicians and indeed business organisations want to ‘own’ in order to gain political and media advantage.
But in my opinion, many of the arguments are not always particularly well articulated. Condemning all big businesses as ‘bad’ and insisting on potentially arbitrary payment terms regardless of industry or context can lose sight of the bigger picture. It assumes that the issue is top to bottom, and never the other way around.
It assumes that smaller suppliers have acted in accordance with agreed terms and conditions, have invoiced promptly and accurately, and have followed the basic principles of credit management in securing such fundamentals as a purchase order and even ensuring the correct legal entity is being billed at the right address.
It assumes also that only the big transgress, and that smaller firms are wholly virtuous. It fails to recognise that some of the very worst offenders of late payment are the small companies themselves.
Payment and managing cashflow is a far more complex subject than many may think and it therefore requires considered thought rather than soundbite and sanction. It is the culture of late payment that needs to change, and the certainty that when two businesses transact, whatever their size, that the supplier will be paid within terms and conditions that are fair, appropriate and honest, and that sustain a healthy, ongoing relationship.
Philip King is the Chief Executive of the Chartered Institute of Credit Management the largest credit management association in Europe. He is widely recognised in the UK and internationally – as an expert speaker on good business practice, the importance of cashflow and credit management for businesses of all sizes.