In the UK, new financial reporting rules will come into effect in April, requiring big businesses to post their payment records on a government website. This will increase the pressure on these organisations to treat suppliers fairly, and companies will be faced with steep fines for non-compliance. The data gathered by the system will also allow suppliers to compare and contrast the payment performance of customers within specific industries.
While the new rules will certainly increase the burden on larger firms, the Chartered Institute of Credit Management (CICM) also believes that it will improve transparency and strengthen customer/supplier relationships.
Speaking on the BBC’s You and Yours programme, Philip King, chief executive of the CICM, explained that the data intended to be collected by the government is information that businesses should already have readily available.
“Most businesses will have this data in some form or another and should be monitoring how they are treating their supply chain anyway, because if they are not, then they’re not doing their job,” he explained.
He also explained that, given the extent of the problem of late payments, the number of complaints coming through to the CICM should be much higher. The organisation administers the government’s Prompt Payment Code but tends to only receive three or four complaints per month on average. “It should be more than that, as clearly there is plenty of noise around bad behaviour,” he said.
Mr King said it is “incredibly frustrating” to know that so many companies are dealing with the problem of late payments. And the frustration is compounded by the success rate that the CICM has at resolving issues quickly and making long-term changes for the better.
He believes that small companies often fear raising complaints because of damage it could cause to customer/supplier relationships. However, there is little to no evidence that complaints of this nature lead to lasting problems.
“More often than not, a complaint revolves around an invoice that’s not been paid, and when you dig further, it’s very often an administrative issue, a process issue, or simple inefficiency on the part of the customer,” he explained.
In such cases, the CICM’s intervention allows problems to be resolved quickly, and it’s often the first time there is ever any dialogue between the two sides about the problem.
He also points out that while not all businesses behave responsibly, the majority want to support the supply chain and build relationships with their suppliers. In fact, he says it’s often poor credit management practices that are to blame for late payments. Issues such as wrong purchase order numbers and invoices being sent to the wrong address can lead to delays.
His recommendation to suppliers is to take a professional approach to credit management from the outset. “Setting payment terms […] and adopting best practice credit management, can make all the difference in getting paid on time.”
As experts in credit management software, OnGuard provides tools to help businesses organise information, streamline processes and improve customer relationships. To find out more, please contact us today on +31 (0)294 25 6666 or firstname.lastname@example.org. You can also keep up to date by following us on Twitter @OnGuardHQ.