Late payment 'not ethical or right' says businesswoman Karren Brady

Will Green is news editor of Supply Management
7 April 2014

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7 April 2014 | Will Green

Businesswoman and TV celebrity Karren Brady has attacked the practice of late payment.

Brady, the UK government’s small business ambassador, said it was “not ethical or right” for larger firms to extend payment terms.

Speaking to The Daily Telegraph she said: “It’s incredible to me that bigger companies string out smaller companies in their payment terms. It’s not ethical or right. We need to work out how to help, how to legislate.”

Brady, who plans to produce a report for the government on the issues facing SMEs, also said she wanted to cut bureaucracy around government procurement. “The government has a target to give SMEs 25 per cent of its contracts but the red tape is appalling,” she said.

Her comments come at the same time as research by debt recovery company Hilton-Baird Collection Services revealed that 88 per cent of British businesses were affected by late payment and almost half were forced to pay their own suppliers late as a result.

The survey, involving 361 firms, found three quarters had to invest more time in chasing unpaid invoices and 26 per cent classified more than 10 per cent of their debt as more than 90 days old. One in 10 wrote off more than 5 per cent of their turnover as uncollectable in 2013 and a third of firms had to increase borrowing.

Firms waited an average of almost 22 days beyond agreed credit terms in 2013, while businesses with turnover of between £500,000 and £1 million experienced the longest delay. The largest firms, with turnover in excess of £3 million, experienced the shortest delay.

The construction sector suffered the longest delays (24 days) and manufacturing the shortest (20 days).

However, 55 per cent of respondents were against fining late payers.

Alex Hilton-Baird, managing director of Hilton-Baird Collection Services, said: “The extent to which a single late payment can impact upon the supply chain is a major concern. While it’s obviously going to damage the supplier’s cash flow, it’s clear that many are being left with little option but to fight fire with fire.”

He added: “Even as a deterrent, fining late payers simply won’t work as, realistically, it will be left to the businesses themselves to enforce it."

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