Check up on councils' payment terms

A small business support and lobby group is submitting Freedom of Information Act requests to every council and health trust in Britain asking how long they take to pay their suppliers.

The exercise, which involves contacting more than 700 different organisations, is being carried out by the Forum of Private Business (FPB). It is designed to discover how many local authorities and health trusts are paying their suppliers – which are often small businesses – in a reasonable amount of time.

It comes almost a year after the Government urged councils and the NHS to commit to paying their suppliers within 10 days in an attempt to counteract the effects of the recession.

The move also follows the recent release of data showing that, overall, central Government departments are managing to settle the majority of invoices from their suppliers within 10 days. The statistics were recently released by the Department for Business, Innovation and Skills and show, for example, that the Ministry of Defence settled more than 97 per cent of its bills within 10 days during June 2009.

However, the FPB believes its members are much more likely to work for a council or health body, rather than a Whitehall department. As a result, the FPB is hoping to discover exactly how long local authorities and NHS trusts, which number around 470 and 240 respectively, take to pay their suppliers.

The group then intends to name and shame those with poor practices, while highlighting the work of those which pay suppliers in good time.

Late payment is an issue frequently highlighted as a major problem for small businesses by FPB research. It can cause serious cash flow problems for smaller firms and means they are, in effect, providing interest-free credit to larger businesses and public bodies while waiting for payment for services or products. The wait can be as long as four months in some cases.

Delays

One small business affected by the payment practices of NHS trusts is FPB member John Smale, the managing director of Digitimer Ltd in Hertfordshire.

He said: "The firm has been in existence since 1972. We manufacture electrical medical equipment primarily for use in central nervous system and uro-dynamic investigation.

"We supply equipment to many NHS trusts across the country. I would say this amounts to about 40 per cent of our overall business. But despite the Government's pledge that all public bodies would pay invoices within 10 days, none of the NHS trusts we do business with have improved. Overall, one or two do meet the 10-day target, but most pay almost religiously in 28 days. One trust has actually become worse and now pays us in excess of 50 days."

FPB Policy Representative Matt Goodman said: "We believe that our requests under the Freedom of Information Act will paint a telling picture of how long small businesses across the UK are waiting for their local health trusts or councils to settle their bills.

"With the recession hitting home, being paid on time can mean the difference between success and failure. The issue of late payment is a huge one for smaller businesses but many of them are reluctant to speak out about it because they are afraid of losing work.

"By finding out this information, we will be fighting their corner for them and putting pressure on any councils or trusts who aren't paying in good time to change their ways. But we'll also use it to highlight those who are helping small businesses in their areas by paying promptly.

"We're asking the councils and health trusts both to tell us what their standard payment terms are and also to provide figures showing how many of their suppliers were paid within 10 days, 30 days or longer over the most recently available 12-month period.

"This information should provide some highly valuable information without being too much of an administrative burden for them to retrieve."

The FPB has exposed companies and organisations which operate poor payment practices through the 'Late Payment Hall of Shame' on its website.