CICM highlights success of Code in changing payment behaviour
Fifteen of the seventeen businesses highlighted for poor payment practice in May have filed action plans or are preparing submissions to improve their treatment of smaller suppliers, demonstrating the effectiveness of the Prompt Payment Code.
Philip King, chief executive of the Chartered Institute of Credit Management (CICM), says firms have responded positively to approaches by the CICM and the PPC Compliance Board: “Businesses clearly see the value in being a signatory to the Code and, more importantly, the potential damage to their reputation if they fail to honour the commitments that the Code demands.
“What is most pleasing is the innovative way in which firms are addressing the challenge and demonstrating best practice.”
Best practice examples include:
– Engie Services Ltd – which has launched a new policy to mandate the use of purchasing cards for all purchases of £500 or less, giving suppliers immediate payment and reducing invoice volumes by 20%;
– Kellogg Brown & Root Limited – which is embarking on an awareness programme and further training for all staff with a procurement role to reinforce the need to settle more than 95% of all supplier invoices within 60 days.
– DHL – which is re-setting its payment runs to a full ten days below the contracted payment terms (to 50 days) to guarantee that suppliers are paid early or on time. This overcomes a previous complication with payment runs being fixed on a particular date in every month, and what happens when a date coincides with a weekend or bank holiday. “The purpose of the Code has always been to promote a culture of best practice in the treatment of suppliers, and this is proof positive that the Code is working,” Philip added.
Companies who sign up to the Code, administered by CICM on behalf of the Government, pledge to uphold its best practice for payment standards. This includes the commitment to pay 95% of all supplier invoices within 60 days.
The Prompt Payment Code Compliance Board, chaired by Philip King and including the small business commissioner Paul Uppal, regularly reviews the data reported by large companies under the Payment Practices Reporting Regulations to ensure they are upholding their commitments.
Businesses suspended from the Code are invited to produce an action plan setting out how they will achieve compliance with the Code within an agreed period. When they have achieved compliance their status as a Code signatory is reinstated. If they do not, they are removed.
Philip says the actions of a minority who continue to treat their suppliers unfairly, however, remains a concern: “We will continue to challenge signatories to the Code if the obligatory Payment Practice Reporting data, or a specific challenge from a supplier or representative body, suggests that their practices are not compliant with the Code.”