Credit Management June 2018

OPINION
WISE COUNCIL
Credit Management spoke to Bexley Council to find
out more about its early payment drive that’s supporting
its supply chain.
AUTHOR – Alex Simmons
THE will to tackle late payment
culture in the UK has intensified
in recent months, with the topic
leading the headlines in the
Chancellor’s Spring Statement and
underlining how significant this
problem – and the determination to address it – has
become. The consultation, announced by Philip
Hammond and due for publication any day, will
aim to identify the most effective way of changing
long-ingrained behaviours.
For too long, it has become the norm to see
large buying organisations holding on to their
cash (despite earning minimal returns), while their
suppliers that need cash find it very hard to secure
finance and often, very expensive. As a result,
many SMEs are forced to increase their prices to
offset the delayed payment, but sometimes the
consequences can be more severe. It is estimated
that late payment is responsible for the failure of as
many as 50,000 businesses each year, at a cost to the
economy of £2.5 billion.
The public sector has a better record of paying
suppliers in a timely manner than private sector
organisations. In 2017, the Time for Change report,
compiled using information obtained under the
Freedom of Information Act, revealed how the
majority of invoices (90 percent) sent to local
authorities are paid on time, but also detailed how
the administrative weight of the payment process,
which is further exacerbated by aging accounting
infrastructure and a lack of digitisation, makes
payment performance a challenging area for
councils to address.
Undeterred by the scale of the challenge, the
London Borough of Bexley has really grasped
the nettle when it comes to tackling its payment
practices. With an annual spend of more than
£160 million, the Council introduced its Supplier
Incentive Programme (SIP) in January 2016 to
support suppliers, many of whom are small
local businesses, by making wholesale changes
to its payment function. The programme offers
the Council’s suppliers early settlement of their
invoices in exchange for a discount directly related
to how quickly the payment is made.
Having partnered with Oxygen Finance to deliver
the scheme, the council is now paying suppliers
who have joined the programme within an average
of seven days, with thousands of invoices having
been processed early to date, injecting millions of
pounds of liquidity into the economy.
The Recognised Standard / www.cicm.com / June 2018 / PAGE 16