This is the second post in a two part series explaining why the solution to the issue of late payment in the UK is not just a technical one.

In the first article we talked about the scale of the problem of late payment  and the existing solutions in place to deal with it. Increasingly new solutions are focusing on the automated approach and this provides a helpful buffer between the supplier and the debtor, it seems that often suppliers are coy about asking for money and so the benefits of an automated process mean that the ‘dirty’ business of collecting payment is left to a more sterile process and the supplier avoids any uncomfortable escalation in direct person to person communications with the customer.

The irony is that the very nature of this coyness indicates how much value is placed on retaining good customer relationships. Business is not just business, people ‘buy’ other people because they want to feel they can trust who they work with.

E-invoicing and automated debt recovery reminders can be helpful in delivering constant reminders after a debt falls due but often the advice given is to try and make direct contact with the customer and if need be quickly move up the hierarchy as the CEO may not be aware of the problem. Given this emphasis it seems odd to wholly entrust a debt recovery strategy and procedure to a sterile and faceless automated system.

It’s also worth pointing out that threats, whether automated or not, are only as good as the willingness to carry them out and quite often do more harm than good.

 

It’s time for a real change in mindset

Until now the problem of late payment in the UK has been seen as an issue of big vs small. Large company taking advantage of small suppliers. David vs Goliath. The narrative focuses on changing the attitude of the large debtors to ensure they understand the damage they are doing and getting them to commit to paying on time.

But, the real change in attitude needs to come from the small suppliers. These are quite often business owners who have taken the risk to start their own company and are used to being in control. Instead of waiting for a solution to the problem of late payment to be delivered to them, suppliers need to take the initiative and start thinking about it much earlier in the customer relationship lifecycle. This means doing due diligence on new customers and where issues show up, addressing them with the customer before they have a chance to arise.

To borrow from the David and Goliath analogy, David won a battle which due to his tiny size he was bound to lose. He did so by using his head and deploying a tool / weapon to slay his much larger opponent. The point here is not to inflict lasting harm on the debtor but to use one’s head in tackling the issue of late payment.

By sharing and declaring the context around individual instances of late payment into a pool of similar data this will grow to become a resource that can be drawn upon in a positive way to learn more about new customers and address known possible issues at the outset and not after they have become a nasty surprise. It’s called crowdsourcing and it has worked in other industries, most notably travel.

 

The kernel of change.

This is what a change in mindset really means. Suppliers (as well as customers) need to take action for themselves at a group level if any serious impact is going to occur. As the old adage goes, if you want something doing properly you have to do it yourself, meaning you cannot rely on debtors to act against their own self interest or for government to legislate against the problem (something it is highly unlikely to do no matter what party is in power).

What is recommended is a long term strategic approach aimed at preventing a problem and not a short term knee jerk reaction to a problem that has already occurred.

Supplier relationships are vital and that is why they deserve to be nurtured from the outset. The idea that a discussion at the start of a business relationship about something as negative as late payment will always result in unnecessary strain in the relationship at such an early stage is facile.

  1. The willingness to tackle something like this before it becomes an issue could in fact result in a greater respect being accorded by the customer.
  2. Tackling this issue up front is a more proactive and responsible approach to maintaining good business relationships rather than leaving it to chance further down the line after work / goods have been delivered.
  3. The early conversation doesn’t have to be an adversarial one. Again, this comes down to personalities. In fact it can be positioned in more positive terms of strengthening the partnership by addressing the relationship defining issues early on.
  4. If the supplier is aware of potential issues relating to late payment (as a result of insight from The Late Payment Directory) it may be possible to investigate these without having to directly address them with the customer e.g. in cases where the business has been referred by another supplier is could be possible to gather some basic insight from the referrer.

The point is simple, by sharing a small amount of non commercially sensitive information it becomes possible to create an environment from which insight can be drawn which will help suppliers understand how they can get paid faster.