26 Jan UK Businesses paying suppliers on 1,000 day terms
The obligation to report on payment performance became a legal requirement in the UK in 2017 and the declarations of those businesses that are obliged to report are now in the public domain. The reports available for anyone to scrutinise reveals for the first time the scale of the problem of late payments in the UK.
For those businesses that have reported so far* :
– The average time to pay invoices is 72 days
– The average % of invoices not paid within agreed terms is 43 %
– The longest standard payment period for payment of invoices is a staggering 1,000 days
*As at Monday 22nd January 2018
Note, 72 days to pay invoices is the average! 43% not paid on time is nearly half. And nearly three years to pay an invoice?! Is it any wonder that when a large corporation like Carillion goes under that there’s an outcry from suppliers?
Readers, even those in the know, will be very concerned at these numbers. However bad you thought they might be, the reality is worse.
But it’s too early to name and shame. You could do so at a superficial level and identify some big names whose performance is dire but the figures are a little ambiguous. Deloitte for example, the accountants and management consultants who are expert in this domain, appear to have a fairly poor performance against their standard terms but to be fair, their average payment time is not bad. Some ambiguity for sure.
And the 1,000 “standard payment terms” – that does demand some attention. This is what Casual Dining Group, owners of the Las Iguanas, Bella Italia and Cafe Rouge claim their standard terms are. That’s as bit steep and although they report an unimpressive but not that unusual performance in terms of actual payment times – 100% of their invoices are paid after 60 days – those standard payment terms of 1,000 days is in reality more odd than shocking. But it’s what the public record states. (We did invite them to comment and clarify but they declined.)
As it’s early days, I for one am prepared to give the benefit of the doubt to individual businesses. There are slight discrepancies between what a business interprets as payment performance and what the Department Business Energy and Industrial Strategy understands it to be. Is payment date the date payment is initiated? Or is it the date that funds clear in the suppliers bank account? The government department has the final say in this and it is the latter hence why some businesses, despite their best efforts, are not performing to “agreed” terms.
But while I think it is too early to name and shame businesses , these figures reveal a systemic problem within the UK economy that does need a fix. And while I can hear the bleating of financiers and big business people who will claim that business is business and cash flow is critical and so on and I can hear them explain in deliberately arcane lingo that we don’t understand, when the British public see the fallout from a huge failure like Carillion exacerbated by a culture of late payments that is being used to prop up cash flow, share prices and bosses bonuses, I think the imperative to change will become all the more palpable.