Tuesday 7 July 2009

Northgate passes public sector 'late payments' on to own suppliers

Northgate Information Solutions has been 'named and shamed' by a business support and lobby group after doubling the amount of time it takes to pay some suppliers.

The move to take 60 days to settle invoices from recession-hit small firms has been branded 'disappointing' by the Forum of Private Business (FPB), which has written to the company in protest.

Adrian Hancock, managing director of Socitm, the public sector IT managers association, said that he was "appalled by this move over payment times".

Said Hancock, "I think any local authority who has a responsibility for local economic regeneration also ought to be speaking out strongly about such practices - providing of course they themselves are not involved in similar practice.

"Although," he added, "If they are it is likely to be because of poor processes rather than by design.

Richard Steel, CIO of Newham, also said that he was appalled, adding, "We are already unhappy with Northgate as it is phasing-out of support for the Pericles product it acquired in its takeover of Anite - involving considerable cost for customers, including Newham."

Northgate appears to be blaming the public sector for its actions on payment dates, claiming that its own customers have extended payment terms due to cash flow problems.

The company apparently informed its suppliers of the move to lengthen payment dates in a letter which gave them 10 working days to object to this 'standardisation' of payment terms across its supply base. Otherwise, it said, suppliers would be 'deemed to have duly accepted Northgate's revised payment term'.

A Northgate spokesman said that the company "was not immune from what is going on in a recession". However he added that smaller suppliers, such as sole traders, had been excluded from the exercise and that all affected suppliers "were being offered the chance to discuss" the situation. "It is not easy for anyone. We are in a recession," he said. "It will be their choice to continue working with (Northgate)."

One FPB member, who wishes to remain anonymous in case he loses vital business from the company, said: "This is not a sustainable practice, either for bigger companies or their suppliers..... The problem is that bigger companies have the muscle to be able to do this, whereas smaller suppliers have little bargaining power."

FPB chief executive, Phil Orford, said: "Although we can sympathise with the company's claim that it is not being paid on time by many of its public sector customers, it is disappointing that it is passing on these additional costs to its small suppliers, including members of the FPB."

Northgate is the latest company to be entered into the FPB's Hall of Shame. It joins other big businesses including Argos, Matalan and Alliance Boots Ltd.

Northgate has built up a significant business specialising in the public sector, claiming to drive the electoral administration systems for 18 million people and manage more than three million local authority and housing association properties. It is also a major player in the revenues and benefits market - the acquisition of Anite with its Pericles solution meant that the company had over 25% of the R&B market.

Northgate's spokesman confirmed that, although Pericles is no longer being developed, the company is working with the Pericles user group to support those wishing to continue to use it "whilst at the same time offering alternatives".

Newham's Steel points out that escrow is no good for protecting users in instances where suppliers move on from a product. He adds, however, that Socitm is considering creating an insurance product for just such eventualities.