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Big companies are putting the squeeze on their small often one-person suppliers by unashamedly making them wait more than 100 days before paying them. Although small firms’ problem of getting paid late is age-old, the practice of their larger counterparts withholding their monies has hit “outrageous proportions.” In fact, the number of big companies paying for services they have already acquired after the normal 15 to 30-day period has risen dramatically in recent weeks. For many, the situation is even worse: the Federation of Small Businesses said some owner-managers have had to wait well over three months to get payment for their services. Denouncing what they called an ‘abuse of small businesses’ trust,’ the FSB indicated that clients are putting the biggest squeeze on suppliers’ cashflows since the 1990s. Not only is late payment time increasing, but the offending firms are also making their less-resourced victim pay for the delay by imposing new terms and “settlement fees.” Evidencing the claim, the FSB singled out Alliance Boots, the retailer, which has extended its terms, to offer payment 75 days from the end of the month, with a 2.5% settlement fee. So, if a supplier submitted their invoice to Boots on the first day of the month, it would take 105 days -75 days of the term plus 30 for the month – to be paid, and with the deduction. Small firms’ cashflows face further strain because legislation for them to levy 8% interest to the debtor is not always used for fear it will lose them the customer’s future business. Although some small traders argue that a late-paying business is a client not worth having, others say they become financially reliant on the lucrative contracts only they can offer. “Big companies appear to be aware that small businesses are afraid of taking them on over payment terms and are abusing their power as a result,” said FSB chairman John Wright. “Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous.” John Kell, policy officer of the Professional Contractors Group, said late payment was the main reason freelancers decided to quit. “We have just issued advice flyers on what to do if an agency or client is late paying, or has become insolvent. The key message is not to let a late payment slide”, he said. The Department for Business, Enterprise and Regulatory Reform said freelancers who have problems getting paid can get advice and support from the Business Link website . “The Business Link website includes links to other sources of information on payment terms and invoicing from HMRC, Companies House and Insolvency Service,” a spokeswoman told CUK. “Further information from the Payontime website will be incorporated onto Business Link shortly. The website also has two new guides that have been created ‘Preventing Late Payment’ and ‘Recovering Late Payments’.” The following tips, endorsed by the government, from the Institute of Credit Management have been designed to help freelancers avoid late payment : TIP 1: KNOW YOUR CUSTOMER Knowledge is power, as the phrase goes, so make sure you use it wisely •Check the exact name and legal status (you’ll need this if you ever have to take legal action to recover a debt •Use headed paper to verify company details •Make sure the order is from the same entity •Use a reference agency to further verify details and check their credit status •Ask for references from other suppliers and check them ( and other suppliers out) TIP 2: AGREE PAYMENT TERMS BEFORE YOU SUPPLY To ‘assume’ is always dangerous, so be clear from the outset how you will conduct your business •Don’t assume you’ll be paid on 30 days or end of month following •Set out payment terms in writing and try to get written acceptance •Make sure customer’s order doesn’t suggest different terms •Set out penalty (late payment charges and interest) if payment is late – you don’t have to invoke them but the right to do so is useful (CUK: setting out penalty on standard invoices is not advised) TIP 3: INVOICE ACCRUATELY, CLEARLY AND PROMPTLY Attention to details can make all the difference in getting paid on time •An invoice can’t be paid until it’s received •An invoice won’t be paid if the goods and services aren’t clearly satisfied •An invoice won’t be paid if the customer’s order number isn’t quoted •An invoice won’t be paid if it’s sent to the wrong address or has the wrong company name on it •A disputed invoice won’t be paid TIP 4: DON’T BE AFRAID TO ASK FOR PAYMENT The only good customer is a paying customer, and if you don’t ask, you might not get •For large or important amounts – telephone before the due data to check everything is OK •Make immediate contact when payment hasn’t arrived (past the due date) •Be assertive about what you expect and when you expect it •Make the consequences of non-payment clear •Follow up promises to make sure they’re met •Do what you say you’re going to do when you said Jul 23, 2008 Email this article Printer friendly page Previous Page
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