CBI and FSB call on business to adopt fair and fast payment culture

The vast majority of UK businesses recognise the benefits of good supply chain relationships. At the very heart of good practice is a fair and fast payment culture.

Unfortunately, for many businesses, poor payment practices are sadly still a too familiar picture and more needs to be done. A third of businesses report that at least one in four payments they’re owed are arriving later than agreed. 84% of small firms experience late payment every year. This is not sustainable.

Strong supply chain relationships, underpinned by paying on time, ensure that companies of all sizes can create jobs, fuel growth and create a stronger economy. Firms understand this and a welcome fall in late payment debt has followed.

No business leader or owner wants to see others turn to personal credit cards or overdrafts because of late payments, or even worse for a business to go under as a result of not getting paid. There should not be an imbalance of power where extended payment terms or retrospective discounting unfairly impact companies in the supply chain. Because if one part of the supply chain is hit, the impact reverberates throughout.

The CBI and FSB both have vital roles to play in accelerating the fair payment culture that supports all businesses. Our organisations agree that recognising the need to pick up the pace of progress on payment practices and show that good supply chain relationships aren’t just about acting in a responsible way: it also makes clear business sense.

Fixing payment isn’t a case of pitching small businesses against big businesses – it should be about companies irrespective of size joining forces to show that they are committed to fair pay and fair play.  It is right that we celebrate good business behaviour, firmly challenge bad practice where it exists, and call out those unwilling to make necessary improvements

We believe the business community must lead efforts to champion the benefits of fair payment practices. Fewer company failures mean more secure jobs for more people, creating higher wages and driving consumer spending. Greater confidence creates a healthier business environment, with firms spending more on training and upskilling their staff, investing in new technologies and R&D to become more productive.

Making this change must start with the Duty to Report requirements. Great businesses do not simply see this as a burden but as an opportunity, a first step towards long-lasting improvement. Just as with gender pay gap reporting, what gets measured gets done: and all large businesses should by now be reporting on their payment practices and providing complete, accurate data. And there are opportunities to do more, by reporting payment of SME suppliers as a standalone measurement of their performance, to demonstrate commitment to their supply chains. Government too have a role, supporting businesses on this journey.

Payment practices are undoubtedly a board level issue. It is vital that businesses have effective corporate governance which enables an appropriate level of challenge to address any problems before they escalate.

We both agree that every company has a responsibility to consider how they approach this.  For the FSB, a potential model could see a company’s Audit Committee or Supply Chain Committee chaired by a Non-Executive Director.  For the CBI, one way of putting this at the heart of business culture could include highlighting payment performance in their annual accounts.