A FTSE-100 company, which claims to be a champion of prompt payment, was accused this week of ‘bullying tactics’ after it told suppliers they must agree to exempt themselves from the protection of the Late Payment Act.
Rentokil Initial, whose finance director Christopher Pearce is a member of the government-sponsored Better Payment Practice Group, wrote to suppliers warning them that they must agree to 60-day payment terms if they wanted to continue to do business with it. This is twice as long as the period laid down in the Act.
FDs said the ultimatum raised doubts about the effectiveness of the Act, which became law on 1 November and allows small companies to charge interest at 8% above the base rate on bills unpaid after 30 days.
Rentokil’s circular, dated 23 October, said its terms ‘will continue to be 60 days from date of invoice’ with a 1% interest rate for ‘undisputed balances’ over 65 days. The circular added: ‘We are only prepared to conduct business with you on these terms following the date of this letter.’
The company accountant of one Rentokil supplier, employing under 20 staff, said: ‘We have never signed a contract with it nor are we aware of one. It’s using bullying tactics and shouldn’t get away with it.’
Pearce, who is chairman of the FD 100 Group of FTSE-100 FDs, denied bullying. ‘Our terms of payment have been 60 days for a long time now, and as a member of the Better Payment Practice Group, we now make this clear in writing before the contract,’ he said.
The DTI said companies could only exempt suppliers from the Act if they agreed terms before 1 November.
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