Wednesday 16 January 2013

The Prompt Payment Joke....

Given the problem of companies’ increasing use of extended free credit as a source of free finance in these credit-starved times, the government is attempting to tackle the wrong problem, all in the name of protecting the little guy…Ha!, Ha!, Ha!

Even a cursory glance at the Prompt Payment Code will reveal that it focuses on paying within an agreed time. In other words, depending upon the credit period agreement into which a trading partner has been forced, be it on delivery, or within 5, 30, 60, 90, or even 180 days, a company can comply with the Code by paying by the specified date…

The humour starts with the consumer’s cash payment to a retailer. Then, despite zero-defect daily delivery of some SKUs, the retailer feels compelled to demand up to 90 days to bridge the cashflow gap between delivery of goods and payment by the shopper… (Ha? Ha?) 

When challenged to explain the joke, the retailer refers to market ‘norms’, without pointing out that these ‘norms’ have been creeping out from 30 days to the current 45 days in recent years, in readiness for a move to 90, as soon as sufficient retailers have helped to establish this new ‘norm’…

Suppliers who complain are told that there is 'obviously no compulsion' to agree the terms, they are free to sell their goods elsewhere at whatever terms they can agree, ignoring the fact that a customer taking 15 -30% of one’s output does not allow for alternative access to the consumer…  (Ha? Ha?).

But the really ‘funny’ bit is the process whereby larger members of the supply chain simply pass the credit burden back along that chain, “reflecting market norms”, until the point of least resistance is reached, the little guy who re-mortgages to the hilt, or cracks under the strain… (Ha! bloody Ha!)

However, and the biggest laugh of all, in spite of this upfront cash advantage, even the big retailers are suffering sales and margin-wise with some retailers having come to depend on the free-credit norm to such an extent that unplanned falls in consumer demand have caused these cash businesses to succumb to the inevitable….
Their carcases litter the high street…  (your turn!)

Time for everyone to quit the joking, and sort out the real problem?
(For starters, how about passing on the joke, this one needs to go viral…?)

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