Holland & Barrett accused of treating suppliers “shabbily”.
Monday 8th April 2019. James Salmon, Operations Director.
The health food retailer, Holland & Barrett, has been accused of having a purposeful culture of poor payment practices, says the commissioner.
The small business commissioner and senior MPs have taken the highly unusual step of publicly criticising the health food chain Holland & Barrett for treating its suppliers “shabbily”, as part of a crackdown on companies that take months to pay suppliers.
Thee small business commissioner, Paul Uppal accused Holland & Barrett of having “a purposeful culture of poor payment practices”, in a damning assessment. He also condemned them for failing to cooperate with his investigation.
Mr Uppal pointed to data showing that Holland & Barrett took an average of 68 days to pay its invoices and that 60% of invoices were not paid within agreed terms.
Mr Uppal’s intervention came after his office received a complaint from a technology company over an unpaid £15,000 invoice with Holland & Barrett. The retailer eventually paid in full 28 days AFTER the complaint was submitted to the commissioner.
For Holland & Barrett, which was sold to a Russian billionaire for £1.8bn in 2017, the invoice was relatively small. But the episode reveals a more systemic issue.
Mr Uppal said: “Holland & Barrett’s refusal to cooperate with my investigation, as well as their published poor payment practices, says to me that this is a company that doesn’t care about its suppliers or take prompt payment seriously.”
He then added: “The government is determined to end the scourge of late payments and bring about a cultural change to deliver responsible payment practices.”
This is not the first time the issue has been raised. In 2018, ear Holland & Barrett was criticised by the parliamentary Business, Energy and Industrial Strategy (BEIS) select committee over their payment practices.
Rachel Reeves, the committee chair, said: “Consumers would be appalled to hear that a big name on the high street such as Holland & Barrett is treating their suppliers so shabbily. It is outrageous that a company takes on average 68 days to pay its invoices and pays 60% of them outside of agreed terms. These actions show that it is not only a parliamentary committee and the small business commissioner which Holland & Barrett hold in contempt but small businesses too.”
She then went on to add “The behaviour of Holland & Barrett in these instances underlines the BEIS committee’s call for companies who flout the rules to not only be named and shamed but also subject to fines.”.
At almost 150 years old, the company should know better. Founded in 1870 and headquartered in Nuneaton, Holland & Barrett is Europe’s largest health food chain. It has more than 1,300 stores and over 4,000 employees.
Holland & Barrett responded to the criticism saying : “Our agreed payment terms are a standard 90 days, although in fact our average payment time is around 60 days. This is a single complaint and is in relation to one invoice for £15,000 for an IT supplier that was lost in our payment process in the run-up to the busy Christmas period. Once we established what had happened we resolved it very quickly. We work hard to help many of our suppliers with easy payment arrangements as many of them are small and just entering the market – Beauty Kitchen, for example, is one of a number of new and smaller suppliers where we have zero-day payment terms or payment by return to assist with their cashflow.”
However the statement was a bit of an own goal as late payment legislation dictates that payment terms should not exceed 60 days unless their are explicit justifiable reasons, fair to both sides. Therfore Holland and Barratt have admitted they are operating outside of the statutory terms.
The government has said it is determined to stamp out poor payment practices.
UPDATE: 15th April 2019 – Email received from Holland & Barrett.
Group Managing Director of Holland & Barrett sent CPA an email that said:-
As the Group Managing Director of Holland & Barrett I wanted to write to you, as a valued supplier to our business, to provide an update on the issues of poor supplier payment performance raised by the Small Business Commissioner earlier this week. As such, I am attaching a letter apologising for our failings and setting out the actions we are taking to address the situation.
The attached letter addressed to valued suppliers said:-
You may have seen the news coverage earlier this week focussing on Holland & Barrett’s supplier payment performance. This followed a critical report from the Small Business Commissioner into our payment practice.
As the report makes clear, our payment performance in many cases has been unacceptable. I wanted to write to you to apologise personally for our failings in this area and to set out the actions and commitments we have immediately put in train.
Our relationships with suppliers are the bedrock on which our business is built. Even more importantly, our new strategy has as a priority our partnership with suppliers to develop and launch the market’s most innovative products. Creating a fair and trusted partnership, focussed on achieving shared growth through better serving our customers, is a priority for myself and the entire leadership team.
The Small Business Commissioner’s report highlighted a supplier complaint from 2018 and a period of poor payment performance between October 2017 to March 2018. You will be aware that in September 2017 Holland & Barrett changed ownership, beginning a process of transformation and investment to ensure the business is fit for the future. We are grateful to the Small Business Commissioner in highlighting this issue and we are determined to work tirelessly to ensure Holland & Barrett is seen in the future as a role model of good behaviour.
As a priority, we are taking three steps to urgently address our shortcomings:
- We are establishing an independent review to look at and recommend improvements to our payment practices, and generally help us better understand the state of our supplier
- We will publish and respond swiftly to the conclusions of the review in order to begin developing mutually successful partnerships, including the adoption of a new supplier code of conduct to address the issues we
- We are accelerating the roll out of a digital payments system which will bring greater speed and transparency to our payments
I commit to keeping you informed of our progress as we address this issue. I also ask for your assistance if we or our investigator contacts you for input or advice, and invite you to come forward with any comments, challenges and suggestions as to how we can improve the way we work together. Please take this opportunity to be open and honest so we can work together to build a stronger relationship for the future.
I appreciate greatly your patience as we make these essential changes to our business.
Late payment culture risks “spiraling out of control”
AS CPA has regularly pointed out the Late Payment Culture is the biggest problem for SMEs, damaging productivity and is holding the UK economy back.
Analysts have warned that a widespread increase in late payments across British business is at risk of “spiraling out of control” with potentially ruinous knock-on effects for the economy. The bad faith business practice, which has become prevalent in recent years, has been blamed by many for contributing to the 20% upswing in corporate insolvencies over the past three years.
According to newly published data, more than 115,000 UK businesses waited an average of 57 days for payment last year, with more than 1,000 of these falling insolvent as a result. Of businesses that entered insolvency due to late payment in 2018, 34% had waited in excess of 57 days for payment, with 15% having been forced to go as long as 87 days without due pay. The practice has been linked to damaging effects on business productivity, growth and financial stability, with businesses left struggling to cope with an average unanticipated dent of £6,142.
Increase in debtor delays causing insolvencies
Research indicates that companies in the support services sector are most likely to be affected by late payments, with nearly 35,000 businesses reporting late payments and 260 subsequently folding last year. Those in the construction and retail sectors are also significantly affected – with the former seeing an average of a 61 day wait for payment and suffering 146 insolvencies last year.
In a concerning trend, late payments appear to be increasing in both severity and quantity across business. The utilities sector saw a 102% in the number of late payments reported from 2011-2018, rising from 912 to 1,838 annual reports. Over the same period, increases in the length of debtor days were seen in the telecommunications and IT sector (9%), as well as for travel and tourism companies (5%), media businesses (5%), and retailers (5%).
SMEs particularly at risk
In total, it is estimated that late payments to UK businesses amount to £2.5bn a year, placing financial strain on companies’ cashflows, reducing their competitive ability and adding to the annual rate of corporate insolvencies. Whilst both large companies and SMEs encounter late payment practices as a systemic issue in trade, smaller businesses are particularly affected as they are less able to absorb the losses of unpaid debts, facing a greater risk of falling into insolvency as a result. An estimated 50,000 small businesses collapse each year due to issues caused by late payments, with these failures leading to a wider impact on the health of the overall national economy.
Analysts describe the upswing in late payment practices as “worrying,” with Begbies Traynor partner Ken Pattullo urging that the situation “must be addressed if we are to help businesses, and the UK economy, grow.” In order to avoid falling victim to late payments and becoming overwhelmed by short-term cash flow problems, companies are advised to implement a strong credit management system. A robust debt recovery process in particular is essential in helping to ensure that companies are able to pursue late payments as swiftly and effectively as possible and avoid bigger problems later on.
Do you have a problem with late payments?
The Credit Protection Association can help!
Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.
At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.
We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.
Companies in trouble usually have very bad bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.
If you supply to businesses on credit help us help you identify the risks.
Why use a third party collector?
As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When you customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.
Over the years we have collected billions in overdue invoices for our customers.
Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.
Do you realise you may have hidden capital tied up in your business?
No need to run to banks of other finance providers
Do you realise you may have a hidden source of capital within your business waiting to be activated?
If you trade with other businesses and were often paid late then you could be entitled to significant compensation.
Under little known and underused legislation your business could be due huge amounts in compensation that you didn’t even know about.
That compensation could be the cash injection your business needed.
Could your clients be interested?
If you are an accountant who has come to this page after seeing the link, do you have clients who could benefit from this?
Readers of Accountancy Age who have clients in need of a cash injection for their business could suggest this as an answer. Have your clients sold on credit to other businesses? If so so we could help them calculate and recover the compensation they are due on late payments.
Are you clients thinking about retiring, closing their business down or going into insolvency? If so this could be an excellent way to maximise the return they get for their years invested in the business. If your clients collected the compensation they are due on late payments then they could create a nice nest egg from the business or find the finds to rescue it from insolvency.
How can CPA help?
CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hardwork. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.
The Credit Protection Association plc (established 1914) has spent 3 years researching the accounting, technical and legal implications of Late Payment Legislation and our staff and retained solicitors probably have as much working knowledge of this legislation as could be found anywhere.
We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.
Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.
CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.
The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit. You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.
We do the work, you receive the cash.
If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.
We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.
We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.
CPA is passionate about late payment
The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.
We are passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.
If you were regularly paid late we can help. Those former customers used you to boost their own cash-flow, regularly paying you late.
As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.
Under little used legislation, you are entitled to compensation for those late payments.
Now you can boost your own cash-flow.
CPA can help unearth the those hidden treasures.
We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.
Yes, CPA can help you boost your business cashflow.
Don’t let your bankers control you, contact CPA today.
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