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How Large Companies Pay

Report Lifts the Lid on Poor Payment Practices by Large Companies

March 12 2018

A new report published by debt collection and outsourced credit control specialists, My Credit Controllers Ltd, lays bare the state of unfair payment practices inflicted on smaller suppliers by UK's largest businesses.

Concerned by the harmful effects of late payment on small and medium sized enterprises (SMEs), government introduced new regulations that require large businesses to submit details of their payment practices. The authors of the report have analysed submissions made in the first four months of the scheme covering the payment behaviour of nearly 800 large companies including household names such as Triumph Motorcycles, Sports Direct, JD Wetherspoon and Harpercollins.

  • The worst performing company, DS Smith Recycling, imposes exceptionally long standard payment terms of 94 days, but then takes nearly three weeks longer on average to settle its bills. Other subsidiaries of DS Smith Group were also prominent among the worst paying companies, had the ranking not excluded other group members, they would have made up five out of the top ten worst paying companies.
  • Suppliers won't be raising a glass to Diageo, the huge owner of drinks brands such as Guinness and Jonny Walker. It pays only 1% of its suppliers within 30 days while 73% have to wait more than 60 days to get paid.
  • Aston Villa may only rate a place in the Championship, but they're in Champions League qualifying territory in the table of poor-paying companies. The football club takes 89 days on average to pay its suppliers, with one third of suppliers having to wait beyond the agreed time for payment.

See the full rankings of best and worst paying companies in the full report here

More troubling for the government is that the report shows that only 7.5% of large companies have signed up to its voluntary Prompt Payment Code, and that these companies are amongst the worst payers. Three out of the top ten worst paying companies were signatories of the governments Code, whereas none of the ten fastest paying companies had joined up.

Stuart Elmes, Director of My Credit Controllers and one of the reports authors said:

"Our analysis found that nearly a half of Prompt Payment Code signatories took more than six weeks to pay suppliers, while only a third of companies in the whole sample took this long. It looks like the Code is being used by some companies as a fig leaf to cover up a lack of meaningful action on this important issue."

Another controversial practice has been the extraction of payments from small suppliers just to remain on a suppliers list. Two percent of companies were found to have taken payment from suppliers in this way. Many of these were in the food industry, suggesting that even if the supermarkets have cleaned up their acts on this practice, other businesses in the sector have not.

Commenting on this finding, Elmes said:

"This clearly illustrates the way that poor payment practice propagates down through the supply chain, as companies bear down on their own suppliers to offset payment pressures from their powerful customers. Of course where it all ends is when it reaches the smallest businesses that do not have the scale to impose their own terms on suppliers. It is immoral that the least able to pay are being forced to help the finance directors of our largest companies flatter their balance sheets by giving them what amounts to interest free finance."

You can read the full report here.

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