'Softly Softly' Approach to Late Payments Lacks Bite

The government's ongoing pledge to help small businesses keep their cashflow looking healthy has taken a new turn - and it's like 'improving' policing by asking criminals to turn themselves in.

Ministers in the Department for Business, Innovation and Skills work with representative groups of small firms on the Small Business Economic Forum.

And while its remit is to promote the interests of small companies - the lifeblood of the UK economy, just as first-time buyers are the support on which the rest of the housing ladder is built - the SBEF's latest measures lack a little edge.

In particular, the latest proposal is for large firms and representative groups to sign up to a pledge to find new ways of making sure invoices are paid on time.

But wait - there's already a way to make sure invoices are paid on time. It's called 'the law'.

'Prompt payments are vital'

Before we look at the utter redundancy of the SBEF's proposals, let's hear from Mark Prisk, chair of the forum and minister for business and enterprise, who as usual has something nice to say about small businesses and how important they are to everybody else.

"Large firms have a responsibility to ensure their suppliers are paid on time, these payments are vital to businesses in the supply chain, which rely on contracts with larger firms to thrive and need confidence that they can plan for the future without worrying that payments will be late."

If you're owed some of the estimated £64 billion in late payments big businesses in the UK are currently holding back beyond the agreed deadline, he's talking about you.

Phil Orford, chief executive of the Forum of Private Businesses, puts it in terms we appreciate a bit more: "Late payment forces businesses to close, plain and simple."

Give and take

The sheer lack of awareness displayed by some big businesses is astounding - although Mr Prisk puts it in fairly bland terms, he's right to say small firms are vital to the prosperity of the UK as a whole.

As a big brand, if you keep your suppliers financially healthy, you're helping to make sure your supply chain remains competitive - a much better way of cutting your costs than negotiating already-agreed payment terms or simply refusing to settle invoices.

However, time and time again, we see the country's biggest firms take the utterly obnoxious decision to simply delay payment on their invoices, as though they believe they can do so with total impunity.

Taking back credit control

Regardless of how small your company is - and even if you're a sole trader - the law is on your side if you are owed money that is withheld without good reason.

We help small firms both to collect unpaid invoices, and to put in place processes to avoid future disruption.

Many big businesses have fixed invoicing procedures in place, and working with them on these terms can help to secure lucrative contracts - but it should not come at an untenable expense for your own finances.

Simply having formal credit control processes in place can bridge the gap between your ideal payment terms, and those offered by your biggest customers, by making sure invoices are issued, arrival is confirmed, and any delays are chased up, to get the money into your business account at the earliest possible opportunity.

It's an approach that has been sensible for many years - and, with the government's efforts lacking any real substance, is likely to remain the best approach for equally many years to come.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

Image "Siamese Crocodile" from Justin Jensen is licensed under CC BY 2.0

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