This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.


Excuse #5 – Cheque is in the post


This sounds like a classic delaying tactic, based on your extensive experience how often would you say it’s likely to genuinely be the case?

It’s probably the most popular fob off in the book. Not helped by the fact that there’s a general perception that the postal service is unreliable and underperforms, therefore supporting the assertion that it’s at fault.


Assuming it is a stalling tactic, what should be the supplier’s next move?

You should ask for the date sent, by what class of postage and the cheque number. Of course, they can’t provide the latter if they’ve not sent it! If they can’t give you the cheque number ask why not? You may get some interesting reasons, be prepared to challenge them by asking if it really has been sent yet.

The post can be unreliable at times, if I were trying to delay payment my next play would be to suggest the cheque got lost in the post and to wait a while longer.


What can a supplier do to counter this kind of persistent delaying tactic?

This depends on how long ago the customer is suggesting they sent it. If only a couple of days then agree to wait a couple more (with the above details obtained). If it’s been more than a week then ask them to cancel the cheque and send a replacement BACS/Faster payment with the assurance that you will return the cheque to them or destroy it should it ever arrive.


Direct debit or bank transfer both seem like obvious work arounds but what if a customer refuses to go that route?

Unfortunately, even in this modern electronic age there are still many businesses that insist on paying by cheque. These are usually business were the owner/director feels more in control of their money by having to physically sign a piece of paper to make a payment. BACS doesn’t have quite the same feel of control and Direct Debit means relinquishing control completely!

This applies to consumers too, particularly more “senior” customers who may not be so comfortable around electronics and the internet, though this is lessening.

You have every right to refuse to accept cheques, but with that decision you have to accept that there will be some businesses or consumers who won’t want to buy your goods or services because you don’t. You need to look at your customer demographic and decide if the loss of a few late paid cheque payments would have a significant impact on your business.


Are there any circumstance in which a cheque might be a genuinely better mode of payment?

I really can’t think of any. With the advances in online and mobile banking you should be able to pay for just about anything, from anywhere. I can’t remember the last time I wrote a cheque.

A perceived advantage from the buyers’ perspective is that they delay payment, because funds aren’t taken out of their bank account until it’s presented at the bank. So even if they pay you on time, you don’t get the funds on time.

From the sellers’ perspective cheques are easily lost, do not represent cleared funds so can bounce and mean you have to physically go to the bank to pay them in.


NK Credit Consultancy Ltd offers a complete credit management solution for your business covering all the core competencies including due diligence / designing credit policies / designing terms of business / improving the accounts receivable process / ensuring compliance with consumer credit regulation and Credit Insurance Policy / establishing reasonable credit limits and payment terms and more. To contact Nicki click here.

The top five explanations for late payment as recorded on The Prompt Payment Directory in May were…

  1. Our terms are xx days
  2. Invoice dispute – after contract agreed
  3. Accounts clerk only comes on once a week
  4. Can’t afford to pay the bill
  5. Changes in payment terms


Below we set out in a bit more detail what these mean and how you should react if you see them on our directory when doing due diligence on a company.


Our terms are xx days

This highlights the critical importance of pre-agreed payment terms. While there is a strong drive to mandate statutory payment terms to be 30 days this is till not the case.

Always make sure you find out what your new customers payment terms are and if they don’t match yours make sure you have pre-agreed payment terms in place or that you are happy with their payment terms.

Remember that large organisations may operate different payment terms in different parts of their business so do not assume that one set of payment terms is the same throughout the business.


Invoice dispute – after contract agreed.

There are two sides to every dispute, in this case the dispute may revolve around some element of contractual obligation. While you may not want to tarnish a new business relationship by raising the possibility of contractual dispute, if the job is very high value agreeing a process for contractual dispute should be part of the principal agreement.

You should also structure your contract in such a way that your invoices do not go unpaid should you be prevented from delivering your goods or services due to the action of inaction of a third party that does not form part of your own cost of doing business.


Accounts clerk only comes on once a week

If you see this explanation given against any payment rating for businesses you are researching on The Prompt Payment Directory then be sure to find out what day the clerk is due in. Also, do ask if there are any exceptional circumstances when that might change and what to do about it if it does change.


Can’t afford to pay the bill

If you see this as the reason given for late payment for a company you are researching on our directory, your next step should be to obtain a credit report from any of the major credit agencies. At the very least get a copy of the most up to date final accounts for the company your are about to do business with.

If you decide to go ahead you should look into the possibility of splitting the payment, part in advance and part in arrears with as much taken in advance as possible. If you have to bear costs in order to complete the work, you should at least ask for the advance to cover the cost of materials.


Changes in payment terms

Before signing a contract or agreeing to move ahead, check your customer’s payment terms, if they differ from yours be sure to pre-agree payment terms in writing and, most important of all, ensure that the contract stipulates the pre-agreed payment terms are to last for the duration of the contract.


NB: These are not the top five most used explanations nationwide, just what has been recored on our directory and they are subject to change.

In the third of our series of interviews with David Walker of Cashflow Rescue we talked to him about standing up to supply chain bullies.

From his work with small businesses in debt recovery David has plenty of experience of supply chain bullying.

Read on to learn what he has to say.

PPD: In your experience what are the underlying issues that lead to late payment?

DW: I think, unfortunately, there is a culture of paying late and there is a knock-on effect throughout the supply chain. This is then compounded by the fact that suppliers are very reluctant to take any positive action to speed up payments due to the fear of losing future business


PPD: How important is due diligence in reducing the impact of supply chain bullying and late payment?

DW: It is certainly important to have an awareness of what is going on, but any information is only useful if you act on it.

The press is always full of stories about supply-chain bullies but you never hear of supplier refusing to supply them!

Late payment and supply chain bullying are both issues that individuals and small businesses can stand up to if they are prepared to. Bullies don’t bully everyone – only those with whom they know they can get away with it!


PPD: What are your views on preferred supplier lists, so called “pay to stay”

DW: Personally, I don’t like “pay to stay” arrangements. They seem to be just another way of the client cutting margins and putting an ever increasing squeeze on their suppliers.

However, if this is what you have to do to be a preferred supplier, the choice is yours. But, make sure you are fully aware of what you are getting into. Know what your margins are and what profits you are making.

If you’re not making a profit, then you’re better off not working with the supplier.


PPD: What strategies can existing suppliers use to guard against “pay to stay”?

DW: The best thing you can do is to give yourself a choice of clients / customers to supply to. I appreciate that this is difficult when some businesses are so reliant on a particular supplier, but you always have a choice.

Also, the more of a commodity you are, the easier it is to replace you, so make yourself indispensable to the customer.

Think about what you can do to change your business, the products or services you supply, or the customers you supply to. Just because you have always done business this way it doesn’t mean you have continue doing business this way in the future.


PPD: What would you say is the most effective argument a small business can adopt when faced with a customer that asks for a discount in return for paying on time?

DW: If you are going to agree to a discount, it should be agreed up front, not when the invoice is overdue. Also, I would make it conditional on payment being early – not on time.

If a client asks for a discount when the payment is already late, then you always have the option to say “no”. If you’re worried about future work, that’s quite understandable, but do you want to carry on working for clients like this?

As I have said before, give yourself options and you will be in a much stronger negotiating position. However, if you’re cash flow is so desperate that you need to agree a discount do so, but make it according to strict conditions. I.e., X% off if you pay within the next 3 days. If not, the full amount becomes due.


PPD: Many larger organisations have 60 or 90 day payment terms while almost all small businesses operating on 30 day payment terms; what would you say is the most effective way for small businesses to get agreement for 30 day payment terms?

DW: When you enter into the agreement with the customer, discuss payment terms. Find out what it would take to be paid in 30 days. They will be paying their staff monthly, so why can’t they pay you monthly?

When you have agreed what needs to be done, do it! It sounds obvious, but so many people I speak to complain about being paid late but when I look at the problem they have invoiced late, missed a purchase order number off an invoice, they have sent it to the wrong person, they haven’t included time sheets, or anything else that needs to be done.

If the customer really won’t pay any earlier, make sure you invoice on time and budget accordingly.


PPD: Any final thoughts?

DW: Late payment and supply chain bullying is always a sensitive subject. However, in my experience there is always far more a small business can do to improve their situation.

Waiting for legislation changes or a change in culture is a waste of time.

All small businesses should take a careful look at what they are doing. They should give themselves as many options as possible and make themselves as indispensable as possible to their customers and clients. This gives them negotiating power and then they can reduce the impact of late payment on their business.

Also, all business should have a 13 week cash flow forecast so they know what money is coming in and what is going out. Then there are no surprises.

If you know you have to wait 90 days for payment and you have agreed to this, you can budget accordingly. Sometimes, setting out cash flow forecast on a spreadsheet is just the wake up call they need.

Now, don’t get me wrong, I love working with small businesses and I’m 100% supportive of them, but in most cases, they’re not doing nearly enough to help themselves. This needs to change first, and then we might see some changes in the late payment culture in the country.


David Walker is the founder of Grid Law, a firm which first targeted the motorsport industry – advising on sponsorship deals, new contracts and building of personal brands. He has now expanded his remit to include entrepreneurs, aiding with contract law, dispute resolution and protecting and defending intellectual property rights. David set up Cashflow Rescue as a low cost legal alternative for small businesses with debt recovery problems.

The government has published its long awaited guidance on the forthcoming duty to report. Here’s what you need to know.


Who will have to report?

It will only apply to businesses that match two or more out of three qualifying criteria, they are:

  • £36m annual turnover
  • £18m balance sheet total
  • At least 250 employees

A quick look at a cross section of businesses that have been rated on The Prompt Payment Directory reveals many of them are not household names so we’d expect there’s a reasonable chance they would not be required to report via the govt’s initiative. This points to the fact that late payment isn’t simply an issue between small suppliers and large customers.

While we support the government’s initiative and agree that late payment often starts at the top of the supply chain, evidence shows that it’s far from limited to that narrow band of businesses.

As such the duty to report will expose only part of the issue, however to extend it to all businesses in the UK or even mid sized businesses would be to place a costly bureaucratic burden on British businesses, a significant proportion of which are prompt payers.


What must be reported on?

Information is split into three parts referred to in the guidance notes as ‘Narrative’, ‘Statistics’ and ‘Statements’, they cover the following:



  • Standard and maximum contractual payment periods, changes made to the period and how those changes have been communicated to suppliers.
  • Details on payment dispute resolution


  • Within the reporting period, the average number of days taken to make a payment
  • Within the reporting period, the percentage of all invoices that were settled in 30 or less, between 31 and 60 and 61 days or longer
  • Within the reporting period, the percentage of payments due which were not paid within terms.


  • The availability of e-invoicing
  • The availability of supply chain financing
  • The use of so called ‘pay to stay’ schemes
  • Whether or not the business is a signatory of a payment code and the name of that code.


Invoices that have been received within the reporting period but remain unpaid need not be included in the statement.

“Any invoices that are received but not paid in the reporting period should be recorded in the reporting period in which they are paid. For example, if an invoice was received in the middle of the reporting period and was not paid before the end of the reporting period, it would not be included in the figures for that report.”

This suggests that invoices which have terms of 30 days but are received 15 days prior to the end of the reporting period should rightly be excluded from the statement, however invoices with terms of 30 days which were received 45 days prior to the end of the reporting period can also be excluded from the statement.

That’s not so bad in light of the fact that businesses must also report on the percentage of invoices that are beyond terms and remain unpaid in the reporting period. But,

‘If an invoice was already overdue at the beginning of the reporting period, it should not be included.’

This suggests that if an invoice was received in H1, went overdue and remained unpaid at the end of the H1 reporting period it would be reported against as part of the percentage of invoices that were beyond terms but remain unpaid during the reporting period, BUT when it rolls over into the next reporting (H2) period it would fall off the radar.

In conjunction with the above mentioned rule stipulating that any invoice due within a reporting period but still unpaid should not be included in the calculation for the percentage of invoices that were paid beyond terms, this means that an overdue invoice can only be included (one way or another) in the reporting process once no matter how long it remains unpaid for. This presents a potential loophole, albeit a small one.

It is understandable that the duty to report should be fair to both the companies that must furnish the reports and the suppliers, however, the absence of context means that the data supplied shows what has happened but not why it has happened, and so the transparency becomes somewhat clouded.

The ‘why’ is what helps suppliers make decisions when entering into new contracts.


How up to date will the information be?

Businesses are are only required to report every six months. Understandably to push for greater frequency would add an extra burden; initially a quarterly reporting period was mooted but this was pushed back on for that reason.

However, a change in behaviour on the part of the customer will take longer to be reflected, this is bad for suppliers if the change is for the worse and bad for the business making the statement if the change is for the better.


How useful will it be?

As already mentioned above, there is no context around the data organisations are being asked to supply such as wether an invoice was disputed, or incorrectly submitted – eg. no PO.

That means larger organisation may be required to report in invoices that were quite legitimately paid late. It would be pretty hard for that kind of information to be supplied in the reporting process but it’s just that kind of contextual information that is most useful to any potential supplier.


How will it be audited?

In situations where the percentage of late paid invoices may be high, for any organisation to report and publish such data is a counter beneficial thing to be doing and it leads to the obvious question of how it will be audited.

The guidance does not explain this but it does stipulate that anybody who is concerned that a business might not have complied or may have made a false statement can either contact / challenge the business directly or contact the Department for Business, Energy and Industrial Strategy.

This suggests the hope is the auditing process will be crowdsourced by the supplier community.

The penalties for non-compliance are strong and include a criminal offence and a fine for the directors or nominated partner of an LLP.


In summary

The initiative is very welcome and perhaps most importantly it raises the expectation among suppliers that they should seek and be able to find information that can help them make informed decisions before they go into contract negotiations with new customers.

But, the absence of context will make it harder to reach those decisions and this is where The Prompt Payment Directory can make a difference. Additionally, The Prompt Payment Directory gives suppliers the right to reply by allowing them to rate customers on a sliding scale according to their propensity to pay as well as a variety of other contextual metrics.

Of course for suppliers that are already owed money other remedies will be needed. Smaller businesses with tighter budgets and that are owed sums of less then £10k (or even larger sums) can use Cashflow Rescue,  a low cost legal solution to recovering debt. Businesses with deeper pockets can go to specialist solicitors such as Lovetts.

Most importantly, suppliers can increasingly expect to be able take action for themselves to limit the risk of late payment ever occurring in the first place and this is the lowest cost and least stressful solution of all.

Not intentionally looking to jump on the Brexit commentator bandwagon but this is an important point. Both Brexit and the late payment of commercial debts result in lower business confidence but at least one of them is still avoidable.

It’s now certain that the UK will leave the EU but the process of doing so will take years. It’ll involve unravelling the existing partnership and reforging a new partnership with the EU (and the rest of the world).

The end result may turn out ok but it’s the lengthy process of getting there that has the potential to stifle the UK economy.


Overcoming uncertainty

It’s the uncertainty which business doesn’t like and it’s the uncertainty that could make the UK a less attractive place in which to invest in the coming years. Politicians are already doing what they can to shore up confidence in the UK as a good place to do business but the UK business community also needs to do it’s part.

Having a reputation as a business environment in which invoices are routinely paid late is hardly going to encourage foreign direct investment (FDI) into the UK market especially if easy access to the much larger EU market is no longer the carrot it once was.

TLPD learned recently that tech startups in Finland see both the UK and Germany as good places to expand into when making their first international investments.

In the case of the UK this is because of it’s access to the EU and it’s business friendly environment plus easy access to capital. But how might they view the UK in light of Brexit especially when the alternative is Germany where there is still access to the EU market and the German business culture has a much better reputation for paying invoices on time?

The UK needs to do all it can to present a more business friendly face to the world and now that access to the EU is no longer guaranteed a greater emphasis will be placed on just how good the UK is to do business in.


We need to pay ourselves on time.

One of the economic counter arguments for leaving the EU was that the subsequent fall in sterling means imports will be more expensive and as a result UK consumers will have to start buying theoretically cheaper home grown products. It’s thought that the resulting rise in local domestic investment to service the increase in demand for home grown goods and services will take up part of the slack generated by Brexit thereby softening the longer term economic aftershock.

Regardless of how true that may or may not turn out to be, if UK businesses cannot learn to make money circulate more freely by virtue of simply paying their bills on time, the massive growth in new businesses that the country has seen since 2008 will atrophy ever more quickly. That would affect both (un)employment and tax receipts as well as FDI and overall business confidence, something that the country can ill afford right now.

Now more than ever businesses operating in the UK need to make sure that they pay and are paid on time.


What would you do with an extra £30bn?

At the most conservative estimate there is about £30bn tied up in unpaid commercial debts in the UK. That unpaid debt is putting small firms out of business, stifling growth and costing jobs.

By enabling suppliers to be better informed and thereby securing timely payment of invoices business can reinvest that money and grow. That has always been one of the fundamental principles on which The Late Payment Directory was set up and now that the UK is moving towards more uncertain economic times this is more important than ever before.

While the UK is now firmly on track to leave the EU there is no reason why businesses in the UK cannot work to change their own circumstances in relation to the issue of late payment. Only the very short sighted will see Brexit as a reason to ignore the issue further still.