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The Hall Of Shame

October 9, 2009

I was speaking this week with my friend Rene Henschel, who teaches law and economics at the Aarhus School of Business in Denmark. He drew my attention to a UK website which is starting to hold companies to account for their payment practices.

Rene believes that the time has come for regulation to address the creeping disease of prolonged and late payment. Sadly, I have to agree that once again, many corporations are damaging the business environment with their behavior. When a supplier incurs costs and provides goods or services, it is not OK that they have to wait 4 or 6 months to receive payment. And it is even less OK that they have to tie up resources in endless chasing of payment.

Recent input from members, as well as the experiences here at IACCM (we deal with many of the world’s largest companies) have indicated that there really is a problem. Some companies have at least been public in their intent to extend the payment period and then honor their terms. Others are doing it through subterfuge. They find nebulous reasons to reject invoices. They alter addresses without notice. We even had one example recently where they sent a check to the wrong address and then told us they had not issued subsequent payments because the first check had not been cashed!

I suspect this problem with payment periods may have been exaggerated because of outsourcing. I wonder about some of the metrics and financial arrangements that may be driving this behavior. The companies that are top of my list of bad payers are among the elite of the Global 100. I cannot believe their executives really wish them to behave this way.

Many of the companies in the Hall of Shame are in the retail sector. They have powerless customers, so they feel they can afford to upset the businesses that supply them. At least many in the b2b sector are influenced by the fact that many of their suppliers are also their customers.

I am tempted to start a Global Hall Of Shame at IACCM. I don’t want legislation. I am hoping that we can address this problem through pressure on reputation. But is it too late?

Please share your experiences and thoughts.

3 Comments
  1. I think that is a very good idea. To kick matters off, we had a customer who agreed to pay our invoice via electronic funds transfer in British Pounds, but six weeks later a paper cheque arrived in the post in Canadian Dollars, thus further delaying our time to cash and incurring additional bank charges. We have also heard of one well known European company paying supplier invoices on time, but deducting 10% off the invoice amount in the expectation that few suppliers will be bothered to try and recoup the outstanding amount.

  2. This appropach has worked in the past and companies such as Birst and Maunsual’s have been forced to make public appologies to protect and salvage reputations.

    The only word of caution is that sub-contractor’s and suppliers can be very ambitious with claims for payment and for such a campaign to have any effect or credibility, it must distinguish between bad debt and sums in dispute.

    It is not all “one way traffic” there are unscruplous suppliers and sub-contractors that may try to use any such scheme to there benefit.

    • Peter, I agree completely – unethical behavior works both ways and for such a designation to have any effect, there would need to be investigation to ensure that people are not simply maligning competitors or covering for other issues.

      One idea we are considering is to take a more positive approach and have people aim to be good – so maybe for now we should think of a Hall of Fame for those who are doing the right thing.

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