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Dan,

Government need to provide leadership. I think most small businesses can cope with 30 day as a max with 10 days as a target. Life happens so 10 days is not allways possible but it should be the target date for all businesses to pay.

Julian Lewis - Positive Computing
Reply by Julian Lewis on 23/02/2010 at 08:10

The reason people are sitting on payments, is because others are sitting on payments. Its a knock on effect.

The reality is of an upcoming small business, is If someone doesn't pay you, you can't pay the next in line.

If the public sector can't pay up in the required timescales, the knock on effect is significant.

Dealing with large corps is a nightmare for small biz for the reasons you cite Dan. Why because the small biz needs the big paymasters so much, they allow them to take liberties in fear of losing the gig.

I will only deal with companies that accept that they play fair and SBiz needs to have courage to not be put over a barrell a 2nd time.
Reply by Brad Burton on 23/02/2010 at 08:35

Dan

Without having undertaken any research into the viability of this option, what did you think about the 'creative' potential solution that I tossed into the debate yesterday - some form of unified public sector/SME escrow account system?

Reply by Rachel Willis on 23/02/2010 at 09:45

My terms and conditions state that interest will be added to late payments, as do every other set of terms I've ever seen in my industry. How often have I seen this enforced? Never. Trying to continue a business relationship that way would prove to be very difficult. Having tight credit control and strong relationships in place so someone internally can be fighting your corner seems to work best for us. 30 days I can deal with but I have one huge global company on my books that will have taken 5 months to pay an invoice if they pay when they say they will, their terms state 45 days from the date the invoice is received, I sent 4 copies, they just 'didn't receive' it. There's no fax number or email address I can send the invoice to, I have to send it in the mail. I think the government enforcing a standard process would beneficial, you HAVE to have these line of communication open full stop, especially when part of this companies business is providing internet services!
Reply by Ben Baverstock on 23/02/2010 at 13:45

Dan, I think that 10 days is an un-workable time frame, if for no other reason that banks take an average of 4 days to transfer money from A to B.

However, and this is a big however, if small businesses invoice large companies correctly - 45% don't get PO's or address to right dept or person, then large companies have a duty of care to abide by the agreed terms of trade and pay on agreed timescales.
Reply by ralvin on 23/02/2010 at 14:46

We use a 2 pronged approach for this problem. First we set an example, as a business we have no debts past invoice terms. Second, we try to arrange something which we can switch off when payments start to dry up. This is not always possible of course but we try!

Unfortunately some clients are too wedded to the late-payment culture to cope with this. Recently a client who was 6 months behind in there payments had their backup switched off. Two months later and still no payments forthcoming they had a problem and were furious that there was no backup in place. They took a view that their payment concept took priority over the invoice terms. Needless to say we now have our money but have lost the client.

This dilemma of winning the battle but losing the war is what perpetuates the problem.

I think the only real solution is to make late-payments the problem of the business that won't pay. This means that the relationship with the client is not jeopardised by efforts to bring payments forwards. It would also mean that there is a level playing field for all businesses which is badly needed!

How to make it their problem? One solution is to impose a tax on the aged creditors figure disclosed on the accounts. This could be imposed on plcs initially, then on large companies then small businesses. Alternatively, set up a government funded debt collection agency which could take on debts over 45 days, pay 90% to settle the account and recover 110%. Arm it with appropriate powers and no one would dare to fall into its clutches!

Adrian Clements - Lodge Information Services Ltd
Reply by Adrian Clements on 25/02/2010 at 11:59