The late payment crackdown has warned large companies that an invoice is not a scented candle to be contemplated in a darkened boardroom until the supplier quietly becomes a cautionary tale.
The Government says late payments cost the economy £11 billion a year and close 38 businesses every day. Its Small Business Plan promises tougher rules, including stronger powers for the Small Business Commissioner, maximum payment terms and mandatory interest charges.
This is welcome news for firms that have completed the work, sent the invoice and watched it enter an accounts department with the survival instincts of a tortoise. A baker should not need an expedition grant to discover whether a client received the email marked ‘invoice, again’.
For years, some larger companies have treated a due date as an intriguing suggestion from an unfamiliar culture. First comes ‘processing’. Then comes ‘internal review’. Finally, an accounts portal asks the supplier to reset a password created before the invention of disappointment.
“We support prompt payment,” said Tiberius Ledger, Director of Managed Oblivion. “However, promptness must not compromise our core value: discovering a new approver every time a supplier sends a reminder.”
The proposed reforms would give the Small Business Commissioner powers to carry out spot checks and issue fines potentially worth millions. They would also introduce a 30 day invoice verification period, with maximum payment terms of 60 days reducing to 45 days.
That could place an awkward object on the boardroom table: the date when money is actually supposed to leave. Audit committees would have to scrutinise payment practices, meaning executives might finally discuss suppliers before deciding whether the office needs a £14,000 chair shaped like a leadership lesson.
The plan also announced a £4 billion finance boost, including 69,000 Start Up Loans. Such support may help firms grow, although cashflow retains its blunt preference for money arriving when the work is done rather than when a finance director returns from a thought leadership retreat.
The reforms matter because a powerful customer should not be allowed to turn a small supplier into an unpaid extension of its treasury department. At the launch, one invoice finally reached the top of the pile. It thanked everyone for their patience, then requested payment in the next financial year, subject to the discovery of a suitable financial year and a senior executive willing to recognise one.
Source: Department for Business and Trade.
