One of the obvious ways for big companies to boost cashflow is to take a little bit longer to pay its bills – but for a small business that finds itself on the receiving end of this new policy, the consequences can be fatal. As late payments mount, the Federation of Small Businesses has come up with its own solution: it’s going to start issuing Anti-Social Behaviour Orders – currently the preserve of hooligan hoodies and noisy neighbours – for big companies that refuse to cough up on time. Obviously these won’t have any binding force, so technically the big boys could ignore them altogether – but that might not be very good for the corporate image…
The FSB says small firms are currently owed some £26bn by their larger brethren. And despite Government-backed efforts to address the problem (which include the non-compulsory Prompt Payment Code, launched last November), it claims that the problem is actually getting worse – a third of its members reckon they’re waiting longer to be paid than ever. This is backed up by a recent study from Leeds University’s Credit Management Research Centre, which says that many big firms – including the likes of John Menzies, Hammerson, Versace and Michelin – are now taking over 100 days to pay their suppliers. (And if you think that’s bad, the worst offender, property company Hemisphere, is allegedly taking an outrageous 535 days – i.e. a year-and-a-half.)
With a quarter of all business failures caused by late payments (as SMEs run out of cash to pay their own bills), and no sign of things improving, the FSB has apparently decided enough is enough. It’s now going to weigh in on its members’ behalf when it receives a complaint – and if that doesn’t do the trick, it’s going to name and shame the worst offenders. We’re not sure whether this will cause any legal issues – conflicts with confidentiality clauses, for example – and it certainly won’t go down well with the client. But presumably victims will have decided that ruffling a few feathers is better than going bust.
There are two sides to every story, of course. Just because these firms are bigger, it doesn’t automatically mean they have a healthy bank balance – and naming and shaming a firm that’s running out of money is only going to make its plight worse. On the other hand, it’s impossible to feel any sympathy for those who are doing this purely because they can. Legislation is one possible answer – the FSB wants the Government to give Companies House a bit more muscle, so it can force miscreants to play ball. In keeping with the ASBO theme, maybe it could fit the offending FD with an electronic tag?
In today's bulletin:
RBS loses another £850m as bad debts mount
Carphone Warehouse scales up with cut-price Tiscali deal
FSB issue ASBOs to bully-boy businesses
Asda demands ID for 'killer' teaspoons
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