Leader – Rentokil’s lesson in lateness

Rentokil has made a serious error of judgment about late payment.

Last week, this paper revealed it had issued an ultimatum to small businesses to accept its 60-day payment terms and 1% interest rate or lose its business. Hardly the action of a company committed to the government’s better payment practice initiative. Add in the fact that its chief executive is president of the CBI and its FD is leader of the FTSE-10, and its actions become even harder to understand.

But Rentokil’s actions have, at least, highlighted a major fault in the Late Payment Act, which became law on 1 November. Many small businesses, who welcomed the Act with its provisions for 30-day payment and 8% over base rate on overdue invoices, have been aghast to learn that Rentokil is probably within its rights. The act says companies can waive their rights by ‘agreement’, although Rentokil’s take-it-or-leave-it approach sounds more like a threat.

Rentokil is not alone in sticking to the letter rather than the spirit of the law. Many large companies have paid lipservice to the Act while maintaining terms that put cashflow before principles. That they can do so with impunity is a serious indictment of an Act that was meant to change business culture. Late payment is a scourge and if ministers mean what they keep saying about helping business they must give the Act real teeth before it is totally discredited.

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