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Grocery adjudicator key to food firms' late payment crisis

By Mike Stones, 24-Feb-2012

Related topics: Business News

Appointing an adjudicator to police the Groceries Supply Code of Practice (GSCOP) would help to remedy the growing problem of late payments owed to food and drink manufacturers, according to the Food and Drink Federation (FDF).

FDF director of communications Terry Jones said he was unsurprised to hear that manufacturing businesses in the UK were owed £10.3bn in late payments last year. That was up 16% from £8.9bn in 2010, according to Bacs, the direct debit organisation.

Jones told FoodManufacture.co.uk: “Although the supply agreements that are now in place through the GSCOP should mean that payments arrive on time, often the terms themselves can have a restrictive impact on suppliers.

“While an adjudicator would be able to do little to shorten the payment window, its introduction could deal with the wider abuses of market power that we see from time to time which – like cashflow restriction – ultimately impact a supplier’s ability to innovate and invest.”

Lifeblood

Jones added: “Cashflow is the lifeblood of any business and so when payments are held up it can be painful for businesses.”

Mike Hutchinson, head of marketing at Bacs, said that small- and medium-sized enterprises (SMEs) suffered most from late payments. “The problem of late payment is clearly getting worse for SMEs in the manufacturing sector as the value owing is up by more than £1bn on 2010’s figures.

“We urge SMEs working in the manufacturing sector to look at what payments can be automated to help them assert more control over their cash flow, and hopefully alleviate some of that stress on the business and its owner.”

A spokeswoman for the Federation of Small Businesses (FSB) confirmed that late payments plagued FSB members.

Vicious circle

“Small firms don’t have the same financial buffers as larger firms and so getting payment on time is crucial for ensuring the cash-flow of a business,” she told FoodManufacture.co.uk. “Without it, firms will then struggle to make their own payments on time and so it creates a vicious circle.”

The spokeswoman confirmed that late payments were a problem for “a huge majority” of FSB members. “Our recent survey of 11,000 members showed that many are paid late with most late payments coming from the private sector,” she added.

The FSB has urged all public agencies to pay all invoices within 10 days and for all public sector contractors to pay subcontractors within the same period.

Also all private sector companies used by the public sector should sign up to the prompt payment code – the government agreement to pay invoices within 10 days, said the spokeswoman.

Bacs research revealed that the value of payments owed to each firm had climbed to £43,000 compared with £38,000 in 2010.

More than half (55%) of the manufacturing businesses surveyed complained of late payments. And 15% of firms admitted to being ‘very worried’ about waiting for payment, to the extent they are constantly checking for it.

Most manufacturers (51%) reported that they expected invoices to be paid within 30 days. But on average they had to wait another 29 daymaking a total of two months before they received payment.

What’s the excuse this time?