Prompt payment plan must be supply chain-wide, FSB agrees

An appeal by a contractor debt advisory for new prompt payment measures to focus on the links in the supply chain rather than just its top-tier has been echoed by a small business group.

Since the appeal by Safe Collections, which said a new initiative failed to do enough for IT contractors on a chain’s bottom rung, the FSB has suggested the links to be just as important.

It marks a development, in that the FSB initially welcomed the initiative, praising it for its ability to deprive large outsourcers of government contracts if they pay sub-contractors late.

But Safe Collections’ Adam Home pointed out that because the proposals only applied to the chain’s top-tier outsourcing firms, ‘end-of-the-chain’ contractors would notice no change.

Now, the Federation of Small Businesses (FSB) appears to have picked up on his concerns.

It said in a statement: “Government and its strategic commercial suppliers… [must be] making sure that prompt payment is embedded throughout their supply chains.”

The latter words acknowledge the role of parties in the chain who do not hold state contracts (so face no nudge to pay promptly), but who pay contractors who work for big, state outsourcers.

“Government needs to lead by example and ensure that small public sector suppliers are paid promptly on completion of their work,” added FSB Mike Cherry, who made the comments.

“It is unfair and unacceptable that so many small firms… [are] being forced to wait for money they are owed for work completed for the public sector.”

Cherry was speaking after the federation found that nine in 10 small suppliers still report having their invoices paid by a public sector client later than the ‘due date’.

Applying to both central government (88% paid late) and local government (91% paid late), the finding is grounds to introduce tougher measures than those proposed, the FSB says.

It said: “The government [should] introduce penalties for departments, agencies and public bodies who fail to pay invoices on time.

“Additionally, departments, agencies and public bodies should be forced to automatically pay interest on any payments made later than contract terms.”