Retail's late payment crisis revealed

Accountancy Age research has revealed for the first time the full extent of the damaging late payment culture created by some of the biggest names in UK retail for their smaller suppliers.

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Our analysis of hundreds of invoices submitted to eight of the largest retailers in the UK reveals that some small suppliers have had to wait 90 days longer than the terms agreed in their contracts for payment, according to figures provided by credit check agency Graydon.

Marks & Spencer, which is in the midst of a multi-million pound corporate tax battle with the Inland Revenue, has paid less than 47% of invoices within its terms of contract.

‘Overall we pay invoices quicker than the market average and we are striving to further increase the number of invoices paid within the agreed terms,’ a Marks & Spencer statement said.

It added that the invoices under scrutiny represented less than 1% of its invoices in total value terms.

A spokesman for high street retailer Boots, which paid just 41% of the invoices in our research within terms, said the move to a new IT system would have an impact. ‘We are renewing our IT infrastructure and I expect there’s going to be quite a lot of this in play,’ a spokesman said.

Despite this, he added that Boots was seen as a good payer, with large suppliers being paid in 23 days.

Separate research carried out by high street bank HSBC and the Small Business Research Trust, found that late payment is among the top three worries for Britain’s small businesses. According to the Credit Management Research Centre, 20% of business time is spent chasing overdue payments.

The Forum of Private Business said that the late payment of invoices was a ‘barrier to growth’ for smaller companies. ‘As they say “every little helps” and that money is sitting in their accounts earning interest,’ a spokesman said.

Earlier this month, Britain’s biggest supermarket group, Tesco, released record profits of £2.03bn.

Although the company came out reasonably well in the research, with 87% of invoices being paid within terms, it has been handed 184 county court judgments, with a value of more than £440,000, over the past six years.

Clive Lewis, head of SME issues at the ICAEW and a representative of the Better Payment Practice Campaign, said he would encourage businesses to sign up to its code of practice.

‘The retail sector is going through a difficult patch,’ he said.

Waitrose came out top out of the eight retailers in the research, paying 100% of invoices within terms.

A spokeswoman for Waitrose said that it was ’embedded in the company’s constitution to treat our suppliers with fairness, honesty, courtesy and promptness’.

Analysis of a sample of more than 2,000 invoices submitted to the retailers over the past six months found that Boots paid 41%, M&S 46.7%, Somerfield 48.7%, Sainsbury’s 60%, Morrison 76.5%, Asda, 87%, Tesco 87% and Waitrose 100%, of invoices with a value of less than £5,000, within terms.