Capita – a Prompt Payment Code case study


In the past we have not always performed well when it comes to paying our suppliers on time. Our payment practices reporting submission to BEIS at the end of 2018 revealed we were not paying the (then required) minimum of 95% of invoices to small suppliers within 60 days.

The position we found ourselves in was due to the lack of management focus on the topic, and historical practices around delaying payments to manage cashflow. Consequently, we were at serious risk of being suspended from the Prompt Payment Code altogether.

Our journey towards compliance

The appointment of our new CEO, Jon Lewis, in December 2017 proved a pivotal moment in driving the cultural and operational shifts we needed to make on our journey towards compliance. From the outset, Jon made it clear that ensuring Capita behaved as a responsible business was a clear personal and corporate priority. Reforming our practices, paying our suppliers in a timely and compliant way and retaining our place on the Code were crucial elements of this mission.

Jon made sure that our supplier commitments for the Prompt Payment Code were firmly built into the business transformation plan, and significant internal reporting and scrutiny was put in place to help drive change and improvement.

Thanks to this commitment from senior leadership and a decision on the part of the Chartered Institute of Credit Management (CICM) to allow us to continue, we were able to make the process and cultural changes we needed to avoid suspension and improve our performance.

Making changes to drive improvement

From 2018, a development action plan was put in place as well as regular monthly meetings with the CICM, to help pave our way back to compliance. To track progress, monthly reporting to the CEO was put in place, and we worked with Code owners across the business to establish effective group reporting.

Due to the size and complexity of our business at the time, and the out of date processes that existed when it came to paying suppliers, we faced several hurdles as we went about making improvements.

Our systems and processes were not standardised across the group and so we had to work within our existing ‘procure to pay’ process to identify areas where we could drive improvement rather than carrying out a complete redesign.

Our payment terms were not standard and included highly variable terms, some very short. We took steps to standardise these to: individuals 7 days, micro businesses 14 days, SMEs 30 days and large businesses 60 days, while also correcting master data to reflect these changes.

We reinforced our ‘no Purchase Order no Pay’ process, to streamline the processing of invoices through upfront approval of spend. The overall process was reviewed, and additional unnecessary approvals were identified which were delaying payments. These were removed to streamline the process.

The frequency of payment runs was increased to minimise any delays with settling approved invoices.

Furthermore, once the overall process changes had been made, monthly business entity performance was reviewed to identify individual issues requiring resolution.

We continue to report and scrutinise performance every month to ensure that performance is maintained. This regular reporting played a vital role in driving the culture change and focus needed to improve.

Staying compliant in the pandemic

When the pandemic and then lockdown hit in March last year, our invoice processing team based in Mumbai were initially not equipped to work remotely. Realising the importance of remaining on top of invoices, as well as the need to prioritise colleague health and safety, every effort was made to get as many colleagues working from home as quickly as possible.

Working with IT, teams worked rapidly to transport desktop computers home and issue laptops where required. Within a couple of weeks, the team were working effectively on a remote basis, with any technical issues being escalated and resolved quickly.

We knew that to continue with our supplier payment commitments we had to maintain our work on cash collection across both our UK and Mumbai teams, and so the team in Mumbai worked creatively to find solutions. We increased the level of reporting and focus on cash collection and forecasting within the UK, which helped to ensure that there was no disruption to our supplier payment commitments.

The continued strong performance throughout the pandemic and lockdown illustrates the leadership commitment and the cultural change which underpins the improved performance.

The Office of the Small Business Commissioner took over administration of the Prompt Payment Code in March 2020, shortly before the initial UK impact of the COVID-19 pandemic. The OSBC worked with Code signatories throughout 2020 and beyond to understand payment pressures.

 The Prompt Payment Code is a voluntary code of practice, strengthened by government in January 2021, that aims to ensure that small business debtors are paid promptly. Capita are long-term members of the Code, signing up when it was administered by CICM between 2008 and 2020, and remain one of the largest organisations to hold signatory status.