Late payments: Don't be shy about chasing money
3 min read
17 February 2014
Too many businesses have made deferring payment a standard and consistent business practice, says Charlie Mullins.
Almost a year ago to the week I wrote in this column about the dangers of late payment to small and medium-sized businesses. Twelve months later, the issue is not only still causing businesses problems, but in fact has got a lot worse.
Apparently, SMEs are owed almost £55bn in unpaid or outstanding invoices – that’s a jump of 52 percent! New research by Sage Pay has discovered that the average business is now owed £11,358 with £30,000 outstanding for one in five SMEs.
I’d take an educated guess to say the increase in outstanding invoices is as a result of businesses operating in ‘recession-mode’ where firms hold on to money as long as possible, which breaks the payment chain at every link.
I’ve been in this game long enough to know that putting off payments is an established black art of business, that most of us have used once in a while. The problem is, too many have made it a standard and consistent business practice.
Based on these figures it looks like the Government will have to beef up its Prompt Payment Code it introduced last year. The code encouraged all FTSE 350 companies to voluntarily sign-up to pay suppliers on time.
While it was, and remains, a good idea, I did say at the time that there should be a blanket acceptance that prompt payments are good for all businesses.
I hoped that the efforts made by the Government and some of the country’s biggest businesses would filter down through UK businesses, but that doesn’t appear to be the case.
Therefore, this scheme needs to be widened out and on the evidence of these latest numbers it needs to be done as soon as possible!
SME businesses that are paid on time are able to invest in new people, new equipment and facilities and ultimately provide a better service for their customers.
I would like to think that, now the economy is starting to pick up, businesses can return to abiding by the payment terms agreed with suppliers and customers.
This will have an immediate effect of injecting cash into veins of the economy that will boost performance and increase the levels of confidence needed among businesses to implement investment and job creation.
Of course, I’m a realist so I know that might not happen as quickly as we’d all like. Firms will still stick with the practices that got through the recession as they continue to insulate themselves against any potential downturn in our somewhat fragile economic recovery.
But that shouldn’t stop business owners getting what they are owed. Don’t be shy about chasing money. As I always say, if you’ve done a good job, your entitled to it!