Tuesday, 20 January 2015 15:12

Pay on time? No, I've opted out...

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In a frankly astounding turn of events, Debt Guard Solicitors have proposed introducing a right for big businesses to opt out of paying on time.

Read that again, because it's an almost unbelievable statement - a commercial debt recovery firm suggesting that big brands should have the opportunity to simply opt out of being punished for late payment.

To be precise, Debt Guard Solicitors' proposal is as follows:

"The existing statutory right to charge late payment interest does not go far enough and should be replaced by a more robust 'opt-out' system instead.

"For those companies that do opt out, they should be publicly named to dissuade others from following suit."

Chief operating officer Mark Burgess called for these measures in a blog post that has also been doing the rounds in the trade press.

But they would essentially mean big brands could opt out once, and render it impossible for any of their suppliers to add statutory interest charges on to overdue invoices.

Worse still, the only punishment for this would be to have their name added to a list - and even if that list is public, would it stop most small businesses from agreeing to take on a large contract from a FTSE100 customer?

This proposal is indicative of the problem small suppliers face - the perception that you should commit to almost any payment terms, for fear of being blacklisted by the big boys if you stand your ground.

Giving them even more power to simply refuse point blank to accept any kind of punishment for late payment is far, far from being the solution to late payment, and would likely make things much worse than they already are.

Robust or Bust

So what is the true solution? It won't happen overnight, but we need to change the way we perceive overdue invoices - they're not just a nuisance, they're a crime, effectively representing a theft of goods or services.

Agree your payment terms in writing upfront, including any penalties for overdue payments, and you're one step towards enforcing those conditions later on, if you should need to.

Don't be afraid to do so - chasing overdue payments costs you time and money, and the penalties you impose by way of fixed fees and interest charges should reflect that to compensate you for your inconvenience.

Finally, we MUST move on from living in fear of being blacklisted by big customers; yes, you may lose some business if you decide to play hard ball, but we're talking about the kinds of contracts where non-payment could bankrupt you anyway, so it's no greater risk to take.

Importantly, legislation should be opt-out on the part of the supplier, not the customer, so when you are owed money, you hold the power to pursue the debt or not, as you wish.

Nobody should be able to force you to take legal action, or to charge interest to a long-term trusted customer who has hit a financial blip; equally, no company of any size should be able to hold you to ransom over an invoice they should have paid weeks ago.

No excuses, no opt-out clauses, no more sitting in silence - make 2015 a year of change in your own company culture, and together we can change payment culture as a whole for the better.

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