InBev named and shamed for changing payment terms
The FPB's Executive Chairman, Len Collinson, said the behaviour of InBev was reprehensible: "Not only was this decision taken without the consent of InBev's suppliers but also they were given less than a month's notice of the change. Many suppliers of the firm will find it difficult to adapt and will have problems with their cash flow." In a letter to suppliers, InBev wrote: "We rely on strong working relationships with our suppliers ... and "... we thank you for your efforts so far in helping us towards this vision." But Mr Collinson doubts that suppliers will have similar sentiments towards InBev. "This is an abuse of buying power. Suppliers are unlikely to stand up against such unilateral action on payment terms for fear of losing InBev's custom completely. They will have no choice but to accept these changes and the consequences for their firms." InBev, which makes beers such as Stella Artois and Beck's, maintains in its letter to suppliers that this action is part of its vision to move from 'Biggest to Best' and is part of a harmonisation of payment terms across Western Europe. InBev claims it will allow the company to "... place maximum efforts in connecting and investing in our consumers and therefore develop further our ability to offer the potential of long-term sustainable business growth with our suppliers." Mr Collinson has been reading between the lines: "This is nothing short of making suppliers pay for savings at InBev. To try and pass it off as in the best interest of suppliers in the long term is particularly galling." The Belgium-based brewer has been added to the FPB's Hall of Shame, which features a number of other big companies guilty of similar alterations to payment terms. The FPB is concerned they are having a detrimental effect on smaller businesses in the supply chain. It has been estimated that 40% of business insolvencies are caused by late or disputed payment; this leads to loss of employment, loss of capital by directors and shareholders, is effectively a theft of property and imposes burdens on taxpayers, which could be avoided by improving collection practices. Late payment legislation The Late Payment Directive was intended to reduce the commercial pressures exerted by buyers - governmental, public and private - which affected the cash flow of supplying companies. Prior to the Directive, the Late Payment of Commercial Debts (Interest) Act 1998 gave a substantial framework to work with. After some years, it is clear that there are deficiencies in application as late payment continues to be a main cause for companies becoming insolvent. The FPB's adviser on late payment, Paul Gregory, said the UK's smaller businesses continue to suffer from late payment for a number of reasons: "One reason is because making a claim for interest on money owed is optional. As few purchasers have had to pay the Statutory Interest (SI), which is 8% above base rate, the matter is often ignored." Both the Act and the Directive correctly leave companies free to negotiate their own terms. However, both set a 30-day default, therefore any contract in excess of 'net monthly' - where payment is due on the last day of the month following the date of invoice - should have a requirement to set out a 30-day price, and a price for 60, 90, 120 days, whatever is agreed. Each should then add the SI that would be charged over the 30 day period as the amount due on the date of payment by the customer. Mr Gregory has urged businesses to address the issue of late payment in their contracts: "Any contract which does not contain a substantial remedy for late payment is likely to be invalid and struck down by the courts."