Assuming there isn’t another delay, from April next year big companies will have to disclose how many of their invoices have been paid beyond terms.
The idea is that information provided by large organisations will be made publicly available and subsequently act as a deterrent to those that think they might be able to get away with late payment, in turn harming the suppliers that are on the (non) receiving end.
The premise of this deterrent is based on a couple of assumptions:
- that large organisations are the only ones that pay their invoices late
- that all late payment is an act of wilful intent born from a institutionalised policy of late payment
These assumptions are an over simplification.
Underdog vs alpha dog
In the context of late payment, large organisations are held up as pariahs because British people tend to sympathise with smaller put-upon underdogs, but the truth is late payment is rife throughout the supply chain and some underdogs are just as culpable although they tend to pass the blame up the supply chain by excusing their behaviour on account of them not being paid by their customer(s).
The exact nature of what will have to be reported on and the corresponding metrics to be used have yet to be fully clarified although this form released almost a year ago could give some indication. However, the important question remains one of context, i.e. ‘why are customers paying their bills late?’
Firstly, any company required to report on it’s own late payment is essentially carrying out a counter beneficial action and is unlikely to do so with a spring it its step and indeed they may find ways to drag their heels.
Secondly, as is quite often the case with instances of late payment, admin and bureaucracy are the cause, it’s not always intentional malfeasance. So while large organisations will be required to clarify the extent of their late payment, there is less likely to be any focus on why payment was made late and therefore little or no distinction between intentional and unintentional late payment.
The reality behind this second point helps nobody. Suppliers need to understand if they are going to do business with a company that pays late and they need to know if the reasons reflect an institutionalised mindset or an administrative overburden or any number of other possibilities.
Asking the customer why they pay late is unlikely to yield anything useful but asking a supplier what reasons they have been given by a late paying customer is more likely to surface useful context. In fact it makes more sense for suppliers to make a contribution of this nature.
The time to stop waiting for the government to step in has long since passed
Every year it is lamented that both the volume of debt which remains unpaid beyond terms and the number of days it takes for suppliers to get paid are growing. Additionally Government policy moves slowly and no organisation would voluntarily report on their payment practices. This leaves suppliers, i.e. those that are owed the money; these are the people and organisations that now need to step in and become part of the solution as well.
Suppliers can help drive the culture of change that is needed by rating the payment practices of their customers not just in circumstances where it is bad but also in circumstances where it is good. Transparency is the tonic that will solve this problem and by focussing on both positive and “less positive” instances of payment it stands to benefit both suppliers and customers – the latter especially so come April when they will be asked to report on themselves in only a negative way and quite probably with no context.