Settling debts in the supply chain: do prompt payment codes make a difference? A UK study

Trade credit has only recently been taken seriously by business ethicists, despite the common practice of slow payment of suppliers and attempts by policymakers to improve supply chain behaviour. In the UK, initiatives have included the introduction of voluntary ‘payment codes’. However, at the time to which our data relate, relatively few FTSE 100 companies had signed up. Furthermore, although signatories paid more quickly, the difference was not statistically significant. These two findings might appear to suggest that payment codes are ineffective. However, some companies were stating that they were following a code which was, in fact, defunct. Their payment speed was indistinguishable from non-signatories’, but those that had signed the extant code paid significantly more quickly. Our findings therefore not only suggest that a payment code might indeed be effective in improving the operation of supply chains but also show a result relevant to codes of ethics more generally – that there might be signs that a company is not taking a code seriously, which we identify with the notion of hypocrisy. Given the appearance of a further prompt payment code in the UK and developments elsewhere, we make suggestions for further research in this developing area. The findings will be of interest to researchers of prompt payment and of codes of ethics, to those responsible for the management of trade credit, and to policymakers seeking to improve the efficiency of payments in supply chains.