Could a Trojan Horse on the board get you paid quicker?


The latest idea to tackle the never ending late payment issue has apparently even got Mrs May thinking.

Hot off the press, a report by The Federation of Small Businesses (FSB), solemnly titled “Time to Act; The Economic Impact of Poor Payment Practice”, puts some new numbers on the late payment problem and makes some interesting, if somewhat intriguing, suggestions.

It has been a widely discussed area of concern for a long time now but that’s been about it; purely discussion. Small Business Tsars, the Prompt Payment Code and the threat to name and shame the bully boys has done little over the years since the credit crunch to counter the fact that 61% of small businesses are paid late by big businesses.

The wider economic impact is also highlighted by figures indicating that a reversal of this position could add £2.5 billion to the UK economy and save 50,000 businesses from terminal insolvency.

Tricks of the trade

The report is a lengthy tome, complete with graphs and country by country comparisons along with explanations of some of the not so subtle methods used by big businesses to improve their bottom line at the expense of their smaller suppliers. Methods such as retrospective discounts are rightly outed as just a blatant change to already agreed terms whilst early payment discounts are often laughably applied for just paying on time. Both methods are of course enforced with the veiled threat of delisting.

One of the blunter instruments, the Prompt Payment Code, also comes in for some stick following claims that a number of firms persuaded to sign up to it only did so following a prompt (and often not negotiated) increase in their own terms of up to 3 times the previous contract.

Any limits to board minutes?

Whilst a number of the recommendations in the report simply call for firmer action on previous initiatives the one that sticks out (and is allegedly being considered by Theresa May) suggests that the culprits “be required to appoint a (non-executive) Director on their board, with a specific statutory duty to report on behalf of the company suppliers, presenting their findings to their executive board and subsequently including them in the Annual Report”.

Just who pays this non exec’s salary, and therefore wields a certain amount of power over them, is not made clear. It could lead to all sorts of split loyalties and in reality just adds another level of bureaucracy to what is a simple problem. Surely just making late payment illegal would suffice?

It is unclear this early on in her premiership as to whether Mrs May is a sincere small business crusader or just paying lip service to the problem whilst applying Darwinian Theory to business practice.

Whatever the Government’s stance the realists among us will probably assume that in another 8 years 61% of small businesses will still be paid late by big businesses!

 

By Steve Leeves