The issue of late payment has loomed large in my life over the past week. Last Tuesday I was in Westminster to attend a roundtable on the issue, which brought together senior figures from banking, government, financial health, accounting and politics.
I have also had emails on the topic flooding in to my inbox in response to the latest SM100 question.
And this weekend I was at a birthday dinner, which concluded with the inevitable, rather awkward process of trying to work out how much each person owed.
Here’s what I’ve learnt:
- Being paid on time is far more important than being paid quickly.
The Government has committed to paying its suppliers within five days and is encouraging those in the private sector to do the same. That’s a good idea, but I do wonder whether it’s the best answer. Might it not be better to allow flexibility in the length of terms but focus on ensuring that they are adhered to? As long as suppliers know exactly when they’ll be paid, they will be able to plan ahead and have a sensible discussion with their bank. I think it’s the lack of consistency that needs to be tackled, not the speed.
- The human element is underestimated.
Another recurring point that arised from the discussion was the reputation, with regards to payment of suppliers, of an extremely large supermarket. There were a number of anecdotes shared about the company, all but one of which was critical. The other was a story about a supplier who had spoken to them and made clear that if she wasn’t paid on time, her business was at risk, and from then on she was paid on time, every time.
I don’t know, but would imagine part of the reason this company has got such a bad reputation is due to its sheer size. The many layers and processes between the buyer and the person handling the invoice is, no doubt, very high. But by communicating on a human level, the supplier was able to sort things out. I think that would be the same in every company, no buyer would want to put their supplier at financial risk, so the more communication there is between the two parties – and if possible the people handling the payment – the better.
- Don’t leave it to the last minute
This applies to both professional and personal life, whether you’re ironing out a contract with a new supplier or settling up a bill for a birthday meal, you should get the details about payment out in the open from the start. To not do so just delays the inevitable, and risks souring the future relationship.