The late payments crisis and poor payment practices will only end when there is a fundamental cultural shift in the boardrooms of big business and those at the very top must show a willingness to address the issue and be accountable for their payment practices.
In a letter to all FTSE 100 companies, Mike Cherry, Chairman of the Federation of Small Businesses (FSB), urges their chairmen and chief executive officers to take immediate action by agreeing to lead the way in finally stamping out poor payment practices and what he calls supply chain bullying.
Calling for companies to appoint a non-executive director with specific responsibility for good supply chain practice, Mr Cherry said that big firms must not be content with doing the absolute minimum they can get away with while still squeezing their suppliers.
FSB research shows that 84% of small firms are paid late, with 33% reporting that at least a quarter of payments they are owed arrives later than agreed and even more (37%) telling the Federation that payment terms have been lengthened over the past two years.
Mr Cherry’s letter was sent in the wake of Parliament’s official report into the collapse of Carillion, which among other things found that the company had been squeezing its suppliers and that the Prompt Payment Code had not worked effectively.
Practices such as those used by Carillion are putting small businesses at risk by forcing many to turn to personal credit cards or overdrafts just to survive, the FSB argues.
Many do not, with late payments leading to an estimated 50,000 small businesses going under every year, it calculates. To tackle the problem, Mr Cherry has invited big companies to become champions of good payment practice.
“My door is open to any business looking to work with small businesses to get this right,” he said.