Some news, views and comments about everything and anything, relevant and irreverent.
Late payment remains the new British disease, and the bigger they are, the later they pay. Large corporations using the unofficial bank of small business just makes unethical sense and a marginal profit for one side of the equation. For those on the negative side, it just doesn’t add up.
It’s hardly surprising that just about every company with a high street store or a stock market listing cried foul, when politician Jeremy Corbyn stood up recently in the British Parliament, and claimed, according to media reports, that big business was holding back £26bn a year by not paying bills on time, and it was driving 50,000 small firms out of business.
What isn’t in dispute though, is a culture that small business calls late payment, and big business calls efficient cash flow management. Whatever your perspective, not getting paid means not staying in business, and that’s the real issue.
While it may make good political copy to stand up in Parliament, like some latter-day Robin Hood, the picture is a little less clear cut than the flash of a righteous blade through a Sherwood Forest of sharp practice. There’s good and bad on both sides. After all, there can be few of us who pay our own personal dues much before they’re due. Scale that up, and we’re all playing the same game as the big corporations.
Those corporations that have pulled up their tights however, are often signatories to the government-backed voluntary Prompt Payment Code. It’s easy for any company to do so, but you don’t have to put pen to paper to err on the ethical side. Ask yourself whether the goodwill, and the business a good name brings, is worth more to you than the marginal cost of tightening up your own payment terms.
In general, the bigger the corporation, the more systemised their payment procedures. Their terms of business may not be the most generous, and will most probably be stacked in their favour, but, buried in the initial purchase order, there are likely to be payment rules laid out. Conversely, in general, the smaller the business, the more informal their billing procedures, and the less likely they are to pursue their own terms and conditions with all the rigour required.
To avoid anger and anguish at a later date, we at Springfords always encourage clients to keep on top of their billing and collection. What’s more, and just as importantly, we think you should always establish payment terms in advance of contracting to do the job.
If you know in advance, for example, that your purchaser quotes payment terms of ninety days from invoice, that’s a cost you have to take into account up front. It’s no use persuading yourself that allowing your client three-months interest-free credit will not affect your bottom line. Similarly, if your client says they pay at the end of the month after invoices are submitted, then you’ll be doing yourself no favours by presenting your bill just after the calendar month has turned. A simple question about terms of business does nothing, other than enhance your reputation for a professional approach to business.
Much as it would be better for British business all round, tardy settlement isn’t going away anytime soon. It’s therefore in the interests of business in general that new legislation now requires larger companies to publish how well they’re doing, in terms of average time taken to settle supplier invoices.
That league table of the miserly won’t necessarily compel any one company to sharpen up their act, nor will it impose a legal time limit on payment. Neither will it catch out the smaller unethical businesses, who just consider payment as a last resort.
We can’t provide a catch-all solution to late payment issues, but we can advocate that we all do our best to make ourselves as well informed and as robust as possible, so that when the inevitable cheque doesn’t come in the post, we’re in as good shape as possible to deal with it - and not leave it until we’re expressing ourselves in terms that wouldn’t be appropriate on a purchase order, or anywhere else for that matter.