IoD Survey Reveals Late Payment Still a Threat - CPA | The Credit Protection Association

Telegraph article 2/4/2018 “IoD Survey Reveals Late Payment Still a Threat”

According to a new survey by the Institute of Directors (IOD), most businesses have faced late payments from customers in the past 12 months, making life difficult for small and medium-sized companies in particular.

Various threads of government have claimed dedication to the late payment cause, from the small business commissioner to the Chancellor, Philip Hammond. In the Chancellor’s Spring Statement he bemoaned the “scourge” of late payments and announced a call for evidence on the topic, hoping to reduce the problem; his announcement has kept the issue of late payment in everyone’s minds, further prompted by the collapse of the construction giant, Carillion. Despite this, late payment continues to torment particularly small and medium-sized businesses. This new survey by the IOD only further illustrates the same continuing menace for many U.K. enterprises to contend with.

At the Credit Protection Association (CPA), many of its client-members also experience late payers and of course occasionally encounter businesses that do not pay at all. However, when they are members of CPA, they mostly receive payment soon after, without damaging goodwill. Businesses should always start by helping themselves and ensure they have efficient credit control procedures in place. As well as possessing sound negotiation skills, credit control staff should be well versed as to current legislation and how the current law can assist creditors to get paid by using the Late Payment Compensation legislation – or get someone like CPA to implement their claim on their behalf.

While official bodies demand that the government lays down the law concerning late payment, businesses and others seem not to realise that the law is already on their side but it is rarely used.

(https://www.legislation.gov.uk/ukpga/1998/20/contents Part (1), Section (4) and the Late Payment of Regulations Amendment 395, statutory instrument which came into force March 16^th 2013.)

The Late Payment of Commercial Debts (Interest) Act (1998) can deter businesses from taking longer than 30 days to pay their suppliers. It is bizarre that few businesses are properly aware of the legislation and even less so how to use it. CPA has familiarised itself with the specifics and recently was asked to process for a client just one ex-customer who alone owes it nearly £1,000,000 in late payment compensation!

With many businesses completely unaware of the amount of compensation they are entitled to, late payers remain free to continue taking unfair advantage of their creditors. The IoD survey found 52 percent of IoD members had faced issues of delayed payments in the past year.

Poor organisation at the customers’ end was blamed by 31 percent of companies which faced difficulties, as they complained about “excessively bureaucratic payment systems”. Another 23 percent said some bigger firms in the supply chain are imposing “grossly unfair” terms for their payments.

A further 9 percent said the customer changed the terms of payment after being invoiced; while 5 percent of delays were caused by a dispute between the firm and its customer.

The IoD said: “It is deeply disturbing that so many businesses have to struggle to claim the money they are owed. Chasing late payments can have a particularly damaging effect on small companies, sapping resources and hurting their productivity,” said the IoD’s Edwin Morgan.

While Mr Morgan acknowledges that the government has attempted various initiatives such as the Prompt Payment Code, these have been ineffective and he demands the government introduce “stronger measures to clamp down on the menace of late payment”.

The survey of 787 companies found that 34 percent would support a mandatory maximum payment term, and a further one-fifth said increased penalties for late payments would be the best solution.

The irony is that there is already a mandatory maximum term for payment under the Late Payment of Commercial Debts (Interest) Act. Unfortunately, not only are most businesses unaware of the legislation, but some are either overly cautious or too complacent to chase up payments, thus allowing payment terms to be consistently ignored. They also fail to claim the late payment compensation that is due to them.

Despite many initiatives, proposals and publicity campaigns by various governments, late payment remains the affliction of UK businesses, thus frequently leading to cash-flow problems and insolvencies. From the government’s viewpoint, this retarded overall national credit cycle leads to less taxable income, which leads to increased national debt. Customers frequently offer up the most brazen and ridiculous excuses, however there is no logical/commercial reason for commercial creditors not to pursue overdue accounts, especially if they need the money!

At the Credit Protection Association, its credit management products will always be effective for ‘victims’ of late payment. The supply chain makes all businesses responsible to their suppliers. There is also the proven and effective method of using the existing late payment compensation legislation that will help suppliers realise a windfall of cash to be paid to their businesses.

The Credit Protection Association can be reached on 020 8846 0000 and their website is: www.cpa.co.uk.

– David Baber- Managing Director of the Credit Protection Association