Big firms accused of ‘ignoring rules’ over paying suppliers

More than 1,000 big companies are flouting the law by ignoring rules that oblige them to report how long they take to pay suppliers, an industry group has warned.

An analysis of government data by the Chartered Institute of Procurement & Supply (CIPS) highlighted a significant number of large companies that had not complied with their ‘duty to report’ under rules designed to stamp out late payment of invoices.

Since 2017, large businesses have been required to publish reports on payments to suppliers at least twice a year. About 15,000 companies should have reported by now, but fewer than 14,000 submissions have been recorded on the government portal.

The institute, which represents supply chain professionals, said that the government must police the rules and ban those who cannot show that they pay suppliers on time from government work. It added the data that had been filed showed the average large business paid almost one in three of their invoices late.

Malcolm Harrison, chief executive of the institute, said that “serial late payers” must be “held to account”.

The CIPS research was published as the Prompt Payment Code, a voluntary scheme designed to promote good payment practice, removed or suspended seventeen companies for mistreating suppliers. The firms have been removed or suspended from the Government’s Prompt Payment Code for failing to pay suppliers on time. The 17 UK companies were shamed during the last three months for failing to meet standards set by the Chartered Institute of Credit Management.

The Prompt Payment Code (PPC) requires firms signed up to pay 95% of supplier invoices within 60 days.

A review of whether companies are meeting the standards was completed in its first phase and the process identified 17 companies to be either removed or suspended.

The five to be removed are: global mining giant BHP Billiton; logistics business DHL; engineer GKN; construction company John Sisk & Co; and tea maker Twinings & Co.

The Prompt Payment Code was created by the UK government in 2008 in response to a call from businesses for a change in payment culture.

Businesses suspended from the Code have been invited to produce an action plan setting out how they will achieve compliance within an agreed period.

When they have achieved compliance their status as a Code signatory will be reinstated. If they do not, then they will be removed.

Philip King, chief executive of CICM, said: “The Board is disappointed with the actions of a minority who continue to treat their suppliers unfairly, and has no satisfaction in having to name them publicly.

“As part of our work driving culture change to end late payments, we will continue to challenge signatories to the Code if the obligatory Payment Practice Reporting data suggests that their practices are not compliant with the Code.”

The round of suspensions builds on a government announcement in November, where failure of companies to demonstrate prompt payment to their suppliers could result in them being prevented from winning government contracts.

From September this year, any supplier who bids for a government contract worth above £5m a year will be required to answer questions about their payment practices and performance.

The expected standard is to pay 95% of invoices in 60 days across all their business.

Any supplier who is unable to demonstrate that they have systems in place that are effective and ensure a fair and responsible approach to payment of their supply chain may be excluded from bidding.

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