Prompt Payment Please
Prompt Payment Please
2019 will be a difficult year for businesses everywhere. The impact of the Trump Trade Wars will start to hit harder. There are worries about the cost of repeatedly burgeoning debt. Brexit will be pushed further down the road with the uncertainty that will bring. We are all jittery about the stock markets – but not as jittery as they are about themselves. In many places business pace, if not actually slowing, is proving more volatile, straining financial planning and prudence.
It is time to address the question of slow payers. Every business, large and small, suffers from the cost of unpaid bills, threatened bad debts and the expense of repeated chasing for payment. Terms of 30 days or 60 days are routinely ignored making cash flow impossible to forecast with any accuracy. Businesses finance themselves out of their suppliers cash. It is wrong and inefficient.
Every business should include in its terms a penalty interest on outstanding bills. The difficulty is in enforcing it. Either the customer simply refuses to pay and threatens to cancel future orders or the payment is further delayed because the invoice becomes a ‘disputed’ one, with all the time-consuming exchanges that can involve. It is an area that governments should step into. If prompt payments could become the culture of business, money would move faster. More importantly, it would level the playing field for smaller companies with less clout.
All governments swear eternal devotion to SMEs. They should do. Look at the employment figures. SMEs account for a major part of the workforce. Today SMEs are struggling to keep up with digitisation, AI, robotics and, most of all, big data. This last is a tool of immense potential importance to any company. Smaller companies need help in understanding what data will really help them and how to handle the volume of information at their disposal.
The rhetoric about SMEs is, unfortunately, not mirrored by action. Government departments themselves are often slow – sometimes very slow – payers. They introduce systems of invoice checking that baffle the wisest of auditors and the most methodical of accountants. Unnecessary bank charges are regularly down to the supplier’s account. ‘Split authorisations’ make the checking of payments boringly hard work. A level playing field seldom results.
Marks & Spencer taught me a great lesson when I was in my early 20s. It was Michael Marks practice to pay a supplier on sight of invoice. Any queries, could be dealt with later. That is how Marks & Spencer built such a profitable business. Their negotiating was tough but their dealing honest. That lasted while the family controlled the business. As soon as an outsider was appointed Chairman the rules changed and M&S delayed payment to suppliers. This gave them a one-time cash boost. It also bankrupted two major suppliers. M&S went downhill from that point on.
We practice the M&S lesson. Our business pays suppliers on sight of invoice. We get outstanding – often preferential – service, keen prices and no nonsense. Is it perhaps time for governments to step in and make payment within the terms of business statutory? There are obvious problems but that is what governments are for – to sort out difficulties. Where there’s a will…
It sounds a boringly technical subject. Believe me, it is not. An entire industry of debt collecting has been built on the concept of cash hijacking. It is time to call a halt to it. The dollar you owe a small company is that company’s dollar. Not to pay it when agreed is theft.
It is time to put a stop to that source of theft.
It is time for governments to take action.