Diageo Supplier Payment Terms On The Mend

Diageo is no longer on the Naughty List. That is, the Naughty List of the U.K.’s Forum of Private Business. The forum has reportedly removed Diageo from its “hall of shame” of businesses that impose unfair payment terms on its suppliers, and its removal hints that the company is responding to recent criticism.

Reports on Tuesday (Dec. 22) said that the forum removed Diageo from that list after concluding the company took steps to improve supplier payment terms; the company had been on that hall of shame list since Jan. 2015.

The beverage conglomerate is said to have agreed to implement a maximum 60-day payment term for all U.K. SMEs. The company has also implemented a supply chain financing program for its suppliers with interest rates of 1 percent.

[bctt tweet=”Diageo agreed to implement a maximum 60-day payment term for all U.K. SMEs.”]

Diageo also vowed to respond to any invoice discrepancy issues within 48 hours and to nix any hidden supplier fees or forced discounts.

The list of these improvements was the focal point of Diageo during a meeting with the forum’s managing director, Ian Cass. According to reports, Diageo’s efforts are “recognizing the importance of small suppliers to themselves and the wider economy.”

Cass, meanwhile, pointed to Diageo’s efforts as proof of the effectiveness of the hall of shame.

“Clearly, we needed a carrot-and-stick approach to late payment so that firms, once they have been put into the hall of shame, then we have the incentive to change their ways,” he stated, adding that the forum is collaborating with the Institute of Credit Management and other trade groups to introduce nonregulatory ways of improving supplier payment practices.

“That way the government and the future small business commissioner can focus on regulator improvements,” he said. “For us, making all businesses pay within 30 days (ideally at a European level) would make sense.”

Earlier this year, Diageo ruffled feathers when it announced longer payment terms to suppliers, extending from 60 to 90 days; just three months later, however, the company agreed to maintain the 60-day payment terms.