Small business lobby the Forum of Private Business (FPB) has accused drinks manufacturer Diageo of a “cynical exercise” in extending its payment terms and introducing supply chain finance to help suppliers cope.

FPB said Diageo extended its terms from 30 days to 60 days in 2009 and recently extended them by another 30 days, meaning companies must wait three months for payment.

The group says the move is out of step with the government’s Prompt Payment Code, which sets parameters on what client companies can and can’t do.

It says companies must give clear guidance on payment terms to suppliers and must not change payment terms retrospectively.

“Diageo now appears to have broken its commitment as a signatory of the Prompt Payment Code,” said the FPB in a statement.

“This episode further highlights the need for urgent action in order to tighten the existing rules around the Code, the Forum believes.”

FPB chief executive Phil Orford said: “We are very concerned, but sadly unsurprised, to learn that Diageo is yet again extending its payment terms, a practice that is hugely damaging for small businesses.

“We are consulting with the Institute of Credit Management and Department of Business Innovation and Skills to challenge Diageo’s status as a signatory to the Prompt Payment Code and will call for their removal.

“The practice of big businesses using a supply chain finance scheme in order to extend payment terms and protect their own cash flow is a worrying trend that is spreading across sectors and industries.

He added: “At a time when the economic outlook remains uncertain it is fundamentally unfair that small businesses are being used as a line of credit for larger organisations and propping up big business.”