The 10-day target has failed to bring about real change
Thursday, September 20, 2012
The 10-day target was launched by the previous government to standardise prompt public-sector payment in the hope that private companies would swiftly follow suit. Unfortunately, that has not yet happened. While it has been embraced by many public bodies, the Prompt Payment Code, a voluntary agreement to treat suppliers fairly, has been signed by only a handful of the UK's largest firms.
Official figures show that most central government departments are adhering to 10-day or, at worst, 30-day payments, but we felt it was important to probe payments from local authorities – where the bulk of public-sector work for smaller suppliers is.
Our freedom of information data shows there remains a postcode lottery for local authority supplier payments, which means firms in certain regions get their money much more quickly than those based elsewhere, which risks creating significant competitive imbalances between locations.
Furthermore, despite all of these initiatives and more, there have been just marginal improvements in payment times since 2009, when we carried out identical research. On average only 51% of council invoices in the 2011/12 year were settled within the 10-day time frame. That compares with 45% in 2009.
On the whole, the results are disappointing. Councils in the North West are the quickest payers, while those in Yorkshire are the worst. Nationally, average payment times improved by just 0.4 days, from 17.9 in 2009, to 17.6 in the 20011/12 financial year.
The worst performing council for 10-day payments is Ashfield District Council in Nottinghamshire, with just 0.9% of invoices paid within this timescale.
Overall, just eight councils said the average time taken to settle bills is over 30 days, with Worcestershire County Council by far the slowest payer – taking 65 days on average.
Leicester is in the bottom 10 of proportion of bills paid within 10 and 30 days, although the average time taken to settle its bills is 28 days. North East Lincolnshire and Hammersmith and Fulham are also highlighted as consistently slow payers.
However, some trailblazing councils are setting the standard for others to follow. Tonbridge and Malling are the best performing under 10-day payments at 97.1%, with South Northamp-tonshire second on 96.1%, and Waverley third on 94.2%.
Northamptonshire’s four-day average payment time is exceptional, and we even think that the Local Government Association should consider making them a beacon council in prompt payment. There are many authorities – and private companies – that could learn from its example.
The main question, of course, is how do we get the private sector to follow suit when late payment is so ingrained? The key message must be that squeezing your suppliers forces them out of business, which ultimately erodes choice for your customers.
The other message is that business owners need to up their game too. Invoicing clearly and on time and putting in place cashflow management procedures to deal with late payment before it is a problem, rather than after it has become one, should be standard business practice.