Patience Wheatcroft: Late-payers don’t need a nudge, they need a smack from the law.

Baroness Wheatcroft, in the Sunday Times on 16th December 2018 has said Late-payers don’t need a nudge, they need a smack from the law.

Patience Wheatcroft, a director of St James’s Place and Fiat Chrysler, writes in the Sunday Times – See link below – about  the policies over recent years that have attempted to solve the problem of late payment.

She says the Small Business Commissioner, Paul Uppal, may have celebrated the organisations first birthday this month, but SMEs do not “feel he has made much progress towards his aim of “driving a culture change” in how big companies settle their bills with suppliers.”

Baroness Wheatcroft cites figures from the Prompt Payment Directory, a ratings platform, which reported that 52% of SME owners said that poor cashflow caused them panic attacks, anxiety and depression.

She goes on to say that however well-intentioned Government initiatives may be, “unless big companies are legally bound to pay bills within 30 days, they won’t!”

The Sunday Times, Business, Page: 9

How to challenge the late payment culture

James Salmon, Operations Director at The Credit Protection Association agreed saying   “not enough is being done to tackle the late payment culture”

The Legislation exists to give businesses the tools to fight late payment but it just is not used.

While business customers are still able to threaten to remove future trade from their suppliers, they are able to get away with late payment without consequences as their supplier just sees late payment as an unavoidable cost of doing business and keeping the customer.

Late payment legislation allows suppliers to get compensation on every invoice paid late. They can even go back six years (due to the statute of limitations) and charge compensation and interest on late payments that happened in the past.

How can this challenge the culture?

Business customers may rely on their trading relationship with a supplier to get away with late payment.

They may think “my supplier isn’t going to ask for compensation and interest and risk souring our relationship”

But what happens when that relationship ends?

What if they faced the very real prospect they face of being charged with 6 years worth of late payment compensation and interest on all the previous late payments. Once that relationship ends, the supplier is fully entitled to go and ask for that retrospective compensation.

That fear should drive them to amend their practices. Why risk late payment? Why operate with the risky of a large penalty looming over them?  It would be better for them to pay on time and avoid that risk.

They may not even end the relationship themselves, the supplier might get into difficulties and realise they have this large untapped asset in late payment compensation that is available to them. Or the supplier might just look at all the late payments over the years, the hassle of chasing and decide that the business customer is worth more to them as an ex-customer than they are as a current customer.

However this only becomes a real fear if suppliers actually start doing it.

At present, not many suppliers are insisting on this compensation  and therefore it is not at the forefront of businesses minds.

The more suppliers pursue late payment compensation, the more it becomes main stream, the more businesses will realise that the culture of late payment is not the magical free cash flow machine they thought it was and that it does come with a potential future cost.

Once they discover that every invoice they paid late, no matter how small, could lead to a compensation claim of at least £40, even if it was only late by a few days, then they are going to want to change their operating procedures to avoid future claims.

With larger late paid invoices being worth £70 or £100 in compensation and with interest calculated daily at 8 percent above base then the costs of routinely paying suppliers late could be massive.

This is the slap Baroness Wheatcroft says late payers need.

Business customers should quickly realise that it is better to pay their suppliers on time and instead finance their business’ cashflow through more traditional means.

This doesn’t just mean deciding to write a cheque or instruct the accounts dept to raise a payment on the day it becomes due. If the payment arrives late, the penalty will still apply. No, to avoid the claim, those business customers need to make sure the payment arrives on or before the due date.  If  it arrives one day late then the full compensation is still due under the legislation.

If payments start coming in on time, then those suppliers in turn will them have the cash to pay their suppliers and so on and so on….  The chain of late payment can be broken. The late payment culture can be stopped. We have the tools.

This isn’t an attack on business. Getting cash to flow faster through the economy can only boost our nations productivity.

Imagine a world where businesses and business owners spent more time working on productive projects and less on chasing payments!

Imagine a world where business owners could turn round jobs faster!

Imagine a world where business owners spent more time planning growth and new products and services and spent less time stressed over cash-flow!

Breaking the late payment culture can liberate our nations small businesses and small business owners!

How can CPA help?

If you sell on credit and have faced late paying business customers then we can help.

At the Credit Protection Association, our members benefit from our debt recovery and credit management services which give them the tools to avoid and battle late payments. Opening up the financial freedom needed to grow and prosper.

Our new Late Payment Compensation company, CPA (LPC) Recoveries Limited however can help suppliers unlock hidden potential and recover  the compensation due to their businesses.

Integrating the historic ledgers and calculating the claims is a complicated process but CPA has developed the systems to do it. We also have the experience and expertise to collect the compensation and overcome the various objections.

We are passionate about wanting to end the culture of late payment and want to work with suppliers who feel the same.

 

James Salmon, Operations Director, 17th December 2018

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