Calls have been renewed for the government to crack down on big corporates
holding out on paying SME suppliers as the time taken to settle many outstanding
invoices nears the 100-day mark.
The SME sector, which forms the bedrock of the British economy, is being
squeezed by big businesses with some suppliers waiting more than three months to
Complaints have been made about Debenhams, Alliance Boots, Selfridges and B
&Q for introducing payments terms of between 60 and 96 days after the
invoice date and pushing for discounts when bills are paid on time.
‘The problem is growing, particularly in the retail sector,’ said Martin
Williams, managing director of credit reference agency Graydon.
‘In the grocery trade, the Competition Commission has called for an ombudsman
to be appointed to make sure that the supermarkets don’t pass on excessive risks
and unexpected costs to their suppliers.
‘If the authorities believe this is a practice that should be stopped, why
can’t the government take steps to stop other retail giants from doing the
same?’ he said.
Williams’ comments came off the back of a Smith and Williamson study which
panned the ‘pass the parcel’ regime that is inflicted on many SMEs.
The firm was reacting to news of major UK retailers extending their payment
terms to suppliers
to 96 days and also asking for larger discounts.
‘This corporate game of “Pass the Parcel” may seem innocent enough to a
casual observer, but the fact is that many smaller companies faced with this
sort of dilemma would struggle to manage the double whammy of reduced cashflow
and profitability,’ said Guy Rigby, head of entrepreneurs at the firm.
Major high street names were singled out by Williams who said that extending
payment terms was becoming more widespread. ‘There are many who are passing the
pain on to their suppliers in order to safeguard their own profits,’ he said.
Williams believes that the ‘unilateral’ extension of payment terms left
suppliers in the UK and the rest of the world with ‘real cash-flow problems’.
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