Big business screwing small business on late payment

Large firms are abusing their power by inflicting lengthy payment terms on small businesses who are feeling increasingly uncomfortable about using legislation designed to level the payment playing field.  Those are the conclusions of research from the Federation of Small Businesses (FSB) which represents more than 200,000 SMEs in the UK.

The FSB names and shames Alliance Boots as an example.  The high street chemist chain wrote to its suppliers in June to tell them that as from April 2008 all invoices would be paid 75 days following the end of the month of receipt with a 2.5% settlement fee.

John Wright, FSB Chairman, said today:

At a time when small businesses are finding it difficult to deal with a slowing economy and rising costs, it is shocking that large companies think it is acceptable to use them as an unofficial source of credit.

Alliance Boots claims the changes were simply to align payment terms following the merger of Boots and Alliance UniChem in 2006.  A spokesperson said:

Alliance Boots announced plans to align its arrangements with suppliers on a Group-wide basis. Alliance Boots is committed to working with suppliers for mutual long-term benefit and believes that the Group’s procurement strategies are in line with other Groups of similar size and scale.

This seems to be the ‘everybody else is doing it, so why shouldn’t we defence’? Hardly a positive note for small businesses or Alliance Boots suppliers.

The Late Payment of Commercial Debts (Interest) Act 1998 lets small business charge interest at 8% above the existing base rate on debts due from large businesses. Nevertheless it seems that the fear of losing large contracts, particularly during a slowdown, is preventing many SMEs from taking such action.

Alliance Boots | FSB | late payment |