UK: The price of paying up quickly.

UK: The price of paying up quickly. - Some firms behave like wealthy Poll Tax protesters - can pay but won't pay.

Last Updated: 31 Aug 2010

Some firms behave like wealthy Poll Tax protesters - can pay but won't pay.

In April, Backbite took a piece or of the pants of those bugbears of small companies - big businesses which grant themselves extended credit at the expense of their lesser suppliers. We were also able to reveal (thanks to Dennis Henry of V 1 Consultants) how the slow payers give themselves away in their own published accounts - probably without realising it.

But the slowest payers - the construction groups and one or two others, which we listed last month are not necessarily the most blameworthy. Not if they have difficulty themselves in finding the money to pay their bills. The worst offenders are some companies which are loaded with cash but which are overcome by a literally unaccountable arthritis of the corporate fingers when called upon to write a suppliers cheque. Some businesses carry on just like wealthy Poll Tax protesters. Their slogan might well be: Can Pay, Won't Pay.

The names listed in the table above are among Britain's lower payers. The lower (ie slower-paying) quartile in Dennis Henry's database of industrial and commercial companies is 58 days. All the companies in the table - their published figures suggest - take more than 58 days, on average, to settle their debts. They could afford to be a great deal more accommodating towards their normal trade suppliers. But it's also clear from the order of their listing - by the ratio of cash/trade creditors - that some could manage the extra cost with a lot less pain that others.

Suppose that all these companies paid up, not in 58 days or more, but in 45 days on average. Why 45? Because that's the median figure for all 25 companies in the database. (The upper quartile, incidentally, is 33). Naturally, the greater promptness would make something of a hole in their available cash resources. In the case of the construction group, Taylor Woodrow, it would come close to emptying the coffers. But several of the industrial companies would see the height of their cash mountains come down by well under a third. Charter Consolidated would hardly notice the difference.

The cost of trying harder (The net effect of paying up in 45 days)

1 Charter Cons Ind Materials 439.0 65 -7.0

2 Laporte Chemicals 317.0 66 -9.7

3 Unitech Electronics 183.8 66 -16.7

4 Trafalgar House Conglomerate 127.7 64 -24.1

5 Evered Bardon Bldg Materials 120.4 70 -25.6

6 Argos Stores 101.8 71 -30.2

7 Kwif-Fit Motors 100.6 77 -30.6

8 GEC Electronics 96.6 61 -31.8

9 Racal Electronics 95.4 60 -32.2

10 Weir Engineering 93.7 66 -32.8

11 Tomkins Ind Materials 89.6 72 -34.4

12 BTR Ind Materials 87.7 71 -35.1

13 Renold Engineering 71.8 74 -42.9

14 Siebe Engineering 67.2 62 -45.8

15 Low and Bonar Packaging 63.1 61 -48.8

16 T and N Motors 61.0 59 -50.5

17 British Vita Chemicals 50.8 61 -60.6

18 Staveley Ind Materials 48.0 67 -64.2

19 Bridon Engineering 47.2 59 -65.2

20 Taylor Woodrow Construction 38.8 72 -79.3

(a) Assuming 45 trade creditor days.

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