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Pressure pays off for SMEs

Diageo removed from Forum’s late payment blacklist

Johnnie Walker ChristinaSpirits giant Diageo has had a black mark against it removed by a pressure group after it improved its payment terms to suppliers.

The Forum of Private Business, a watchdog on poor payment practices for over a decade, has removed the maker of Johnnie Walker whisky and Guinness from its ‘Hall of Shame’.

The Forum says that the company has taken sufficient steps to improve its payment terms since it was inducted in January 2015.

In a meeting with the Forum’s managing director Ian Cass, Diageo representatives said the company was supporting its suppliers and revealed that it had instigated:
• a maximum 60 day term for SMEs
• a supply chain finance scheme where the interest has been reduced to 1% above Libor from 1.5% due to supplier demand. This was seen as a remedial measure for those on 60 day payment terms
• a response to any irregularities within a submitted invoice within 48 hours
• no hidden extras such as framework, supplier fees or discounts forced on suppliers for the marketing of products etc.

Diageo is now a member of the Prompt Payment Code and undertakes its obligations as a signatory seriously, said the Forum.

The company has provided the Forum with a list of suppliers to contact for an independent assessment of the supplier relationship and the Forum has also taken soundings from some of its own members.

“Clearly, we needed a carrot and stick approach to late payment so that once firms have been put into the hall of shame they have the incentive to change their ways,” explained Mr Cass.

“We are working very closely with the Institute of Credit Management and other trade associations to work on non-regulatory methods to reinforce the supply chain, as we feel that this is a major advantage that Germany, for instance, has over the UK.

“That way the Government and the future Small Business Commissioner can focus on regulator improvements. For us making all businesses pay within 30 days (ideally at a European level) would make sense as our members have to pay HMRC and others within 30 days and getting its current suppliers to pay their supply chain fairly.”

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