Thursday, 11 December 2014 15:10

Premier Foods named and shamed on exceedingly bad payment practices

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Premier Foods - owners of the Mr Kipling brand, along with several other household names - have encountered their fair share of negative press recently, since it emerged that they were demanding that suppliers should invest in the company in order to continue receiving orders.

Yep, that's right - suppliers to Premier Foods, many of them fairly small foodservice businesses, were apparently told that if they wanted to keep receiving future orders, they had to put their own money into Premier in the form of investment finance.

What's more, according to reports, this didn't actually guarantee any orders would be received, and in some cases suppliers were asked for specific amounts of up to almost £2,000.

Unsurprisingly, the Federation of Small Businesses has been quite vocal on this issue, and national chairman John Allan said:

"Premier Foods should be ashamed of themselves. Driving a hard bargain with your suppliers is one thing, but demanding a cash gift under the threat of delisting is downright unfair."

Supply chain bullying

The FSB followed up with a well-timed survey into 'supply chain bullying', in which big brands enforce absurd terms on their smaller suppliers, for the privilege of being allowed to sell them stuff.

From the responses, the Federation compiled a list of the five most hated forms of supply chain bullying, and they are:

1. Flat Fees

Similar to Premier Foods' attempt, these are fees of any form that are demanded under threat of being delisted from the firm's supplier database. 5% of the survey respondents had encountered this, equivalent to an estimated 260,000 businesses nationwide.

2. Pay You Later

This is the typical practice of big firms demanding 90-day, 120-day or even longer payment terms. Under UK law this is perfectly permissible if the creditor agrees - so if it's going to cripple your company accounts, DON'T AGREE TO IT.

If it helps, imagine your client is J Wellington Wimpy from Popeye, famous for the catchphrase: "I'll gladly pay you Tuesday for a hamburger today." Would you give him a hamburger? No, neither would we.

3. Late Payment

This one is self-explanatory, and is simply when payment is made after the agreed deadline has expired. There is plenty of legislation in place to fight this, so don't be afraid to take action against the big boys when you need to.

4. Prompt Payment Discounts

Offered by some SMEs to encourage prompt payment, but in some cases big brands will automatically deduct a small percentage from their fee without asking, based purely on the fact that they've paid on time. We suspect they would quite like to receive a medal, too.

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5. Balance Sheet Bonuses

Finally, some firms try to renegotiate a discounted rate even after the money is already owed - threatening non-payment if the supplier does not agree, or coming up with some nonsense excuse about the size of the order or previously unmentioned marketing fees and so on. Brings to mind the Biff Tannen quote from Back to the Future: "Manure? I HATE manure."

Named, shamed and blamed

A lot of small businesses are under the impression that taking action against unfair payment practices - especially those that breach terms & conditions and contracts - will have negative consequences for their public image; this could not be further from the truth.

Mr Allan summed it up as follows:

"When the public think of their favourite brands, they are unlikely to connect them with the sort of immoral payment practices which are becoming all too common across an increasing number of industries.

"However, it is clear that whenever these examples come to light, the public shares the same sense of moral outrage as the small firms that have to put up with them on a daily basis."

In this age of greater consumer awareness and easy access to social media platforms, be very careful about naming and shaming anyone - but remember too that when these types of stories do come to light, they rarely reflect badly on the creditor, regardless of their size.

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Original Image Hostess cakes in the shape of a sad face by Charles Knowles is licensed under CC BY 2.0

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