While we were out to lunch recently we were chatting about late payment and heard this typical story.
Basic scenario involves a recruitment company retained to supply contractors for a large UK telco. The (telco) customer might ring up at a moment’s notice and need somebody in the very next day to start work. The supplier duly obliges and the contractor begins work. But come time to invoice the telco, upon receipt of the invoice, refuses to pay because there’s no purchase order.
In the mad rush to fulfil the job spec a PO was not sought and not given. The telco is a VERY large organisation and is thus by definition incapable of thinking outside the bureaucratic box, net result the supplier (aforementioned recruitment firm) is paid late. Much wailing and grinding of teeth.
‘Why not request the PO in advance?’ we asked
‘Not enough time?’ we were told.
‘So what happens if this causes a major cashflow issue?’ we asked
‘What can we do, they are huge and we didn’t want to risk dropping off the preferred supplier list?’ we were told.
Some head scratching on our part… how can the constant spectre of major cashflow issues be the right way to run a business? And anyway aren’t preferred supplier lists run on an, ahem, pay to stay basis?
What’s to be done?
Non payment due to the absence of a PO number on invoices in circumstances where one is required is not uncommon and really not necessarily the fault of the customer.
It’s as likely to be an admin oversight that should have been addressed when the recruitment co. successfully made it on to the preferred supplier list.
It seems a bit silly to run a business where services might be needed on a 24 hr turnaround without having some kind of pre-arranged covering PO.
It is the responsibility of both supplier and customer to ensure that POs are sought and supplied but we would obviously add that doing due diligence beforehand as well as anonymously sharing this kind of information will, in the bigger picture, result in fewer such circumstances.
As always, a little bit of info coupled with a smidgen of forethought can go a long way to resolving problems like this before they ever reach critical mass.