Bernard Stitfall, finance director at Christie-Tyler, Hillsdown's furniture subsidiary, tells directors in an internal memo that 'creditors reached the dizzy heights of 67 days (budget 50 days) as a direct result of holding back supplier payments estimated at contributing pounds 8/9m to the funding position at the end of the year'.
Mr Stitfall's comments appear embarrassing in the context of the Government's intended clampdown on late payers. Michael Heseltine, President of the Board of Trade, is considering new steps to reduce the impact of late payment by large companies.
One option is to give suppliers a statutory right to interest for late payments.
Mr Stitfall told the Independent on Sunday that the policy of holding back payments to Christie-Tyler's suppliers only applied at two points in the financial year, the months in which the company's half-year and full-year results are due to be published. He also said that the decision to delay payments was made in agreement with the company's suppliers. He said that the practice was 'primarily to ensure that the finance directors in the group are aware how important cash is to the business'.
The payment delays make the balance sheet look healthier, if only cosmetically, a practice known by accountants and finance directors as 'window-dressing'.
In Christie-Tyler's case the delays add between pounds 8 and pounds 9m to the amount of cash the company has at the half-year stage. Mr Stitfall said the period for getting payments from debtors had 'improved to 39 days (budget 40 days) after a disappointing position at the end of May'.
Some of Christie-Tyler's suppliers, contacted last week by the Independent on Sunday, said that they factored a 60-day payment period into their quotations and were happy with the arrangements.
The DTI says the target it is setting itself for paying suppliers is 30 days. A recent survey by Trade Indemnity, the credit insurance group, showed that late payments and unpaid debts are pushing up the rate of business failures.
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