UK business landscape has a prompt payment / late payment (delete as appropriate) issue.
This subtle linguistic distinction was brought to our attention at TLPD quite recently by a colleague and it’s answer depends on where your place is in the supply chain.
If you’re a customer / debtor then you might prefer to think of the issue as a prompt payment problem. If you’re a supplier and owed money then it is more likely to be a simple issue of late payment.
Both ‘prompt payment’ and ‘late payment’ are phrases used to refer to the ongoing problem relating to money that is owed to suppliers by customers; at the time of writing the latest estimates stood at around £32bn, of which £27bn is owed to small and mid-sized businesses.
Prompt or just plain late.
The reference to prompt payment is softer sounding and more aspirational. For example, the Prompt Payment Code is a government based initiative targeting large organisations with the objective of accruing signatories that will then stand by it’s code of ethics, chief among which is the commitment to pay suppliers on time. This is a distinctly positive and admirable position (and good for a reputation). The term prompt payment signals intent.
By contrast late payment is more a statement of fact relating the situation in which suppliers find themselves once work has been done, invoice submitted and terms have expired. While it may sound more negative it’s hard to think how this can be articulated in any other way.
Indeed some late payment issues are not always the fault of the debtor or customer; for example if a suppler submits an invoice but omits to add a purchase order number which may have been supplied by the customer, or omits to provide payment details (slightly less likely), then it will be very hard for a customer to pay an invoice on time.
In the above example the invoice payment will still be overdue or late but the situation will not have a negative foundation in terms of a customer seeking to avoid in order to massage their balance sheet or, worse still, maximise profit.
Who cares anyway?
Why is this semantic distinction important? Because both terms are used more generally when referring to the wider issue but in reality they relate to different sides of the same coin.
The important point is that while the situation of late payment often is negative, the terms used to describe it are just that – descriptions.
So when evaluating the risk of doing business with a new customer that has a history of late payment, or where a credit checking signals indicates that they may pay late, this should not be automatically seen as a negative point without first gathering more context.
By the same token not all signatories of the Prompt Payment Code are strict adherents to it.