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‘We need a universal culture of prompt payment’ – CBI

Despite the majority of businesses agreeing and sticking to fair payment terms with their suppliers, we need to ensure that all companies have a culture of prompt payment, says the Confederation of British Industry (CBI) submission to the Government’s consultation.

The national late payment debt stands at over £30 billion with the average business owed £31,000. With the economic recovery gaining traction and order books picking up, now is the time when working capital can become particularly stretched.

Matthew Fell, CBI Director for Competitive Markets, said: “Most companies agree and stick to fair payment terms but we need to create a culture of prompt payment in all businesses. It’s unacceptable that many firms are being held back from growing and creating jobs because they are owed thousands of pounds.

To tackle this problem, the CBI is recommending:

That all companies publish their supplier payment policies on a voluntary ‘comply or explain’ basis.

The introduction of a ‘target’ maximum payment term, with flexibility, recognising that a one-size-fits-all approach will not work, because more complex contracts may require different terms.

As part of the Prompt Payment Code, introduce an ‘upper tier’ for companies who wish to sign up to even higher standards, for example by committing to more detailed reporting on payment performance, or shorter timeframe.

That larger companies give clear guidance on their websites clearly stating how their payment process works and set up online finance platforms to simplify the payment process.

That the Government sets out clear guidance around the legal term ‘grossly unfair’ in contract law, so that businesses have greater confidence when negotiating payment terms.

(Source – CBI Press Release dated 31st January 2014)