
1) Why do we have a late payments culture?
There is a cash flow benefit to large businesses in delaying payments. However, for many large organisations that pay late or insist on 60-day terms, it’s not about wanting to be slow – big businesses have complex systems to navigate. It is also a difficult cycle to break as companies are involved in two ways – both as supplier and client. A firm that is regularly paid late can end up being a late payer as a result. This may even itself out between large corporates, but can cause real problems for small business bosses who find themselves at the sharp end.2) Are any changes in law needed?
3) How can we encourage the business sector and government to stop late payments?
One solution would be to implement an accreditation similar to the International Organisation for Standardisation (ISO) quality measures, pressuring bosses to prove they are paying small businesses on time. Part of the measure could be driven via feedback given anonymously from small companies. Internal compliance departments might then focus on ensuring prompt payments.4) Why are small businesses susceptible to late payments, and why does it have such a detrimental effect?
Being paid on time is critical for small businesses, especially in the first few years and particularly when relying on a small number of large customers. Small firms do not have the same resources of large companies to fall back on when there’s a problem with payment. Even where small business leaders have protective processes in place – signed official contacts, and clear payment schedules – they can find themselves in challenging circumstances. For example, late payment interest exists to support them, but many are cautious to use it for fear of harming existing relationships.5) What steps can small businesses take in terms of protection?
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