201504 CM April

CREDIT MANAGEMENT
CM
THE CICM JOURNAL FOR CONSUMER AND
COMMERCIAL CREDIT PROFESSIONALS
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Chartered Institute of Credit Management
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Sean Feast
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Iona Yadallee
Alex Simmons
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ISSN 0265-2099
Audit Bureau of Circulations
July 2012-September 2013:
Average net circulation 7073
the
Editor’s
column
RAISING A GLASS
TO BETTER PAYMENT
BEHAVIOUR
BIG companies are often criticised
for the way they treat their smaller
suppliers and they don’t come much
bigger than Diageo.
Last month, the drinks giant sent out
a letter to its suppliers that set the alarms
bell ringing. It implied that the firm was
looking to move its payment terms from 60
days to 90 days (from receipt of invoice),
and appeared to justify the change by
benchmarking its future model with the
behaviour and culture of ‘… a number of
industry and large organisations…’
Perhaps not surprisingly, the letter was
quickly leaked. Concerns were raised within
the media, with a particular emphasis
on Diageo’s status as a signatory to the
Prompt Payment Code (PPC). The Code,
administered on behalf of the Government
by the Chartered Institute of Credit
Management (CICM), has been much in
the spotlight of late. The Government,
as reported in this magazine, has only
recently announced a series of changes that
enhance the Code’s enforcement powers,
and this was its first major test.
On being approached by the CICM
Diageo, to its credit, quickly sought to
clarify its position and its commitment to
treating the supply chain fairly. It insisted
that its standard supplier terms were not
changing, and that no supplier would be
required to move to longer payment terms
to secure future business.
The CICM, for its part, later praised
Diageo for clarifying its position, describing
it as ‘a victory for Diageo, its suppliers,
and all those that seek to create better
behaviour, culture and understanding of
payment issues.’ (see news page 9).
Diageo’s actions may not be judged so
benevolently, and with such understanding,
by others. Indeed its people might yet be
accused, perhaps unfairly, of executing
something of a climb down. But does it
really matter?
Detractors of the PPC have tended to
say that the Code lacks ‘teeth’. That it has
‘failed’. Really? Despite it being a voluntary
Code, Diageo thought it of sufficient
importance to become a signatory, one of
1800 firms who have so far come to the
same decision. It has also subsequently
defended its right to remain, and go on
record to confirm its 60-day terms. That
sounds like a Code that is working to me.
The CICM, for its part, later praised Diageo
for clarifying its position, describing it as ‘a victory
for Diageo, its suppliers, and all those that seek to
create better behaviour, culture and understanding
of payment issues ...
4
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