21 October 2015

Putting late payers under the spotlight

Late payment continues to be a major concern for printers. 21% of respondents to the latest BPIF Printing Outlook survey reported an increase in the incidence of late payments by customers in the past 12 months, with only 5% reporting any improvement. Moreover, a significant number of printers continue to be under pressure from some customers to accept longer payment terms: almost half of respondents (49%) reported that they had been obliged to accept longer payment terms from customers in the past 12 months in order to help retain or secure business. Of these, 16% were for terms of up to 60 days and 55% for up to 90 days. Disturbingly 22% felt obliged to accept payment terms of up to 120 days and a further 7% in excess of 120 days.

Although the prospect of any legislation requiring payment within a specified statutory period remains unlikely - with Ministers seemingly reluctant to become involved in regulating trading terms - there are encouraging signs that the Government is at least aware of the damage that late payment causes and is taking some actions to try to address the problem.

In February, Business Minister Matthew Hancock MP announced that the government-backed Prompt Payment Code will now promote 30-day terms as standard, with a 60-day maximum limit. Unless signatories can prove exceptional circumstances for longer terms, they will be removed from the Code. The change will be rigorously enforced by a new Code Compliance Board. New legislation came into force on 25 February (the Public Procurement Regulations 2015) requiring every business in the public sector supply chain to comply with 30-day payment terms, including suppliers and sub-contractors. 

Jackie Sidebottom-Every of Glossop Cartons has experienced late payments from clients before, "When we bought Clowes in 2010 we bought the order book, one client (large DIY tool manufacturer) was paying on 90 days nett monthly. We very quickly informed them it was 60 days end of month. They were not too happy about that.Then they propositioned us with a 120 days deal, with an exclusive invoice discounting for their invoices only with a large service cost. I turned this down and demanded 60 days. So that's when we parted company and they then went to another UK printer who was willing to accept the 120 days terms."

Under the new Small Business, Enterprise and Employment Act 2015, the UK's largest companies will be required to publish their payment terms and report on their payment practices and policies on a half-yearly basis. The necessary enabling regulations are expected to apply from next April. Whilst they may not make the 30 or 60 day payment terms mandatory, this "name and shame" approach will certainly place the worst offenders in the public spotlight.

Jackie added, "In general, the UK psychology is to be embarrassed about money and be reluctant to push too hard when payment is due, I believe in naming and shaming late payment perpetrators, it's immoral and stilts business growth especially for SMEs and smaller businesses."