Sunday, 8 September 2013

Low Marks

Surprise and disappointment this morning on reading a report that Marks and Spencer is planning to make hundreds of its suppliers wait nearly three months to be paid.

It’s suggested that the change will generate tens of millions of pounds of cashflow benefits for M&S but it justifies the lengthening of its payment terms from 60 to 75 days as bringing it "in line with industry standards”.

M&S has been regarded by many in this country over the years as an example on the high street, consistently delivering decent quality at a reasonable price and doing it ethically. Still the company can point to a CSR policy that demonstrates commitment to making a few quid without treading on heads.

This is a clumsy move at a time when there is much (welcome) talk about “green shoots”.  The survival and growth of small business remains a vital ingredient of that recovery.

Yesterday, I read a cuddly brochure from Lloyds Bank, as it is to become (no TSB), about how it aims to support the future of Britain etc with its new deal for banking customers. All good stuff, but we’re a long way off yet and I don’t see a general enthusiasm from the high street banks to lend to the sort of small businesses that depend on these big names.

Prompt payment to suppliers is vital in current economic conditions and will remain so. My firm committed some time ago to the Prompt Payment Code promoted by the Institute of Credit Management – a step that required evidence of compliant practice, not simply noble promises.

Why not?  With interest rates as low as they have been for so long, there’s little to be earned short-term from holding onto the money.  Longer-term there is far more to be gained from maintaining healthy relationships with suppliers.

Some will say it’s beyond their control because of delays in payment further up the chain. It’s difficult to see that this is relevant to a retailer that receives payment as the goods change hands. Next reportedly pays after 30 days.

In his letter to suppliers the executive marketing director is reported to have professed “We believe that parity and clarity in our terms of trade are important to all our suppliers and will help our businesses in the long term." He also acknowledged that there “may be some questions.”

Here’s one - why this seemingly short-sighted and selfish stunt by a flagship of the UK economy?

It’s out of character and badly-timed. It doesn’t fit.  It’s one for the “returns” desk guys.