In my various ops roles over the last 20 years, I’ve been responsible for invoicing clients and there is nothing more annoying than clients who don’t pay on time.
The worst culprits are the large corporates, and the statistics make for pretty depressing reading:
- A third of small firms are impacted by poor payment practices
- 400,000 small firms are threatened by late payment – (source)
- About £23bn of late invoices are owed to businesses across Britain, according to the Financial Times
This is despite over 3300 companies signing up to the Prompt Payment Code (PPC) – a voluntary code of practice for businesses. It sets standards for payment practices between organisations of any size and their suppliers.
The ethos of the code is that signatories undertake to:
1) pay suppliers on time, within agreed terms;
2) give clear guidance to suppliers on terms, dispute resolution and prompt notification of late payment;
3) support good practice throughout their supply chain by encouraging adoption of the Code.
From July 2021 they were also required to pay 95% of invoices from small businesses (with less than 50 employees) within 30 days. The statistics above and my experience would suggest this isn’t actually happening.
It’s not just the payment of invoices that is a problem, it’s trying to get a purchase order in the first place. This can take weeks (months) which stops you from being able to invoice which is compounded by late payment when you are able to send in your invoice.
Small companies are hostages to the large ones. Whilst the fees they pay us are relatively small (to them), to us, they can be the difference between survival or going under. This means if we get too stroppy there’s always the risk they will drop us for another company that will accept delayed payments.
It’s really difficult to resolve because the accounts departments are generally anonymous, so you don’t have a particular contact to speak to. Or they have an online system where you have to upload the invoice and then pray to the payment gods that it’s being dealt with.
If I’ve heard the excuse – the delay is due to the implementation of a new system (SAP seems to be a frequent offender here) once, I’ve heard it multiple times.
Or they’ll tell you it’s been approved and then nothing comes through.
Or the remittance advice arrives telling you payment is on its way – on the day the money is due, and inevitably that’s on a Friday delaying payment until the following week.
Or there is a problem with the invoice, but they don’t tell you and leave it languishing untouched in their payment system. And they only respond when you chase.
I’d wager the people involved in accounts teams have only ever been employees, so have no idea of the impact they are having on the small business owner who can be hanging on by their fingernails wondering if they’re going to have enough money to pay their own employees.
Sometimes the only way around this is to go for something like factoring where an organisation pays the value of the invoice to you on time, and they get paid by the company. But this adds an extra cost to the small business.
Other smaller businesses can be just as bad which is almost more frustrating because they know what it’s like not to be paid.
One particular company I did work for had a policy of only paying after you complained about late payment and then only after multiple emails and copying in the owner. I know I wasn’t alone because I was still on an external contact list for the company and I would get multiple calls from other suppliers wanting to know why they hadn’t been paid yet!
Other clients have had the excuse for non-payment – ‘It was such a small amount I didn’t think it mattered’!
It doesn’t matter if the invoice is for £100 or £100,000 – if you owe money for services properly rendered, you should pay it. On time!
Thus endeth my rant.