We recently came across another instance in which a supplier provided work to a customer and was paid late….

The explanation given?

The customer had not been paid by some of their suppliers and cashflow was tight.

This is an entirely understandable state of affairs, after all figures from the Labour party show something that we already know, namely that SMEs also pay their suppliers late, in fact Labour’s figures indicated that about 160,000 small firms were forced to pay their own suppliers late because of delayed payments.

Empty pockets

Not being paid is no excuse for not paying unless otherwise pre agreed.

But, that still isn’t a valid reason for passing the debt down the chain, especially if there is no relationship between the customer’s upstream and downstream workflows.

Even if there is a relationship and it’s all part of a larger contract, as it so often is in the construction industry, there is still no excuse for passing the debt down the chain unless this is explicitly written into the contract.

Suppliers need to be aware of this and call it out in no uncertain terms if they are hit with this explanation for late payment.

In the even that they are, a polite and clearly written email is a good place to start. Wherever possible it also helps to give the customer the benefit of the doubt and offer to help, (not least because it’s good karma).

An example of the kind of email you might write is as follows:

Dear xxxx

Our terms are 30 days, they are not linked to other related or unrelated contracts that you have with your clients. To the best of our knowledge the work we did was not in any way linked to work that you subsequently delivered to any of your clients / customers subject to our output. On that basis we do not think it is fair that payment of our invoice should be held up by incoming payments at your end. [Optional sentence: However, we appreciate that cashflow issues can be difficult to juggle and so we are happy to extend payment terms until the xxx of the month. We hope you will be able to ensure payment is made by that time.]

I look forward to hearing from you at year earliest convenience…”

It’s worth getting something like this down in writing because in the event that you may want to take the matter to court the judge will want to see evidence that you made efforts to resolve the issue in a reasonable manner before resorting to legal action. (For more on preparing to go to court read our interview with David Walker of Grid Law Solicitors.)

Also, when communicating with a customer in any way relating to an issue of late payment, always form your communication with thought in the back of your mind that one day it may need to be read by a judge. That means, don’t get hysterical, threatening, casual with the facts, hyperbolic, or anything else that might cause the judge to have doubts about the credibility of your claim. Stay rational and stick to the facts.

If you follow that basic rule of thumb when you communicate with your debtor you will find that your words, written or spoken, will carry far greater weight and possibly even result in a positive outcome without any unpleasantness.