Why your cash flow sucks

Why your cash flow sucks

The scourge of the system of getting paid by your customers is the big companies, organisations and governments who delay payment or make the process so obfuscated that it takes an eternity to reach your bank. Terms may be 30 days but some organisations reckon that they have big enough orders to delay payment for six or more months. The bully thrives short-term but even short-term may be long enough to bankrupt you. They don’t give a monkey’s umbrella.

They should. When Marks & Spencer switched payment ‘on sight of invoice’ to up to six months delay, the M&S cash flow improved dramatically – a one-time advantage. But the process put two of their main suppliers out of business – and they happened to be the two who did the best work. M&S has gone downhill ever since. There’s another epic case brewing at the moment.

The British Inland Revenue hs chosen to stop a system of tax-avoidance by ‘irredeemable loan’. Sounds pretty boring doesn’t it? Well, for some 100,000 people resident in Britain it is anything but that. What they did was perfectly legal but arguably morally not so bright. Under a regulation called IR35 they had a complicated arrangement in which their wages were paid to an overseas party who then lent the wage earner the equivalent amount, tax free. The loans were so big they were structured to be effectively irredeemable. It was a bad system but it was legal.

Now it is to be stopped and quite right too. It should have been stopped a long time ago. But it is to be stopped retrospectively. In other words, conducting a legal procedure for many years has built up a tax bill which few, if any, of the 100,000 people who are being subjected to it can pay. So British Governance, which use to be known throughout the world for fairness, has become totally unfair, indeed rapacious. The Revenue made the mistake. I fear for those affected.

Arbitrarily damaging decisions by powerful forces are barbaric. What shall we do about them?

First, to remedy the slow-payer problem, make companies / customers pay sizeable penalties if they fail to meet the payment terms and conditions of their contract. Obviously, customers and their suppliers must reach sensible contracts in the first place and equally obviously powerful customers will write a long period for payment. But we will all know about it and naming and shaming is always one step towards putting things right.

Second, quite apart from the issue of sticking to your contract, let governments everywhere encourage companies (and themselves) to pay on sight of invoice. They cannot legislate for this but they can encourage it. The benefits of cash moving around society faster are very clear. Among other things, it reduces the need to increase borrowings to cover growing working capital for young and start-up companies. Terrific Mentors International pays on sight of invoice.

Third, NO retrospective taxation or similar legislation. If people are to be dealt with by statute, let the statute be efficient. Personally, I would prefer a society where people had to make their own decisions and were judged on the basis of how moral their decisions were. But that would require reasonable treatment by the judges. Since ‘authority’ demands keeping to the letter of the law, let not those who do so be penalised if the law is wrong. Two-sided treatment of “you will obey the law but if we cock it up you will pay for our mistake” is a classic bully boy treatment.

We are resisting bully-boy treatments in the local environment of the workplace, class and home.

Level the bigger playing field and the game will become fairer.

A target we should all have.

There have been several requests to record the Daily Paradox and provide a link to the recording. Some people like to listen to my dulcet tones. If you are one of them reply saying PLEASE MAKE A RECORDED VERSION. If enough of you want it I will certainly do it.