Cashflow, as we’ve so often seen, is the absolute lifeblood for any small business: you need to be able to rely on it.
And it’s simply not tolerable for big businesses to hold off paying small contractors as long as 120 days from the date you issue your invoice.
That’s the welcome view expressed by Small Business Commissioner, Paul Uppal, in an interview with the Financial Times (FT), under the headline ‘Carillion failure adds to subcontractors’ case against late payment’.
Yet late payments are becoming more and more prevalent. This needs to change. There needs to be a cultural shift, suggests the commissioner; and, failing that, legislation.
‘Big companies must start paying suppliers on time or be forced to by law, the government’s first small business commissioner has warned’, says the FT.
‘The Carillion case has highlighted the issue of late payment after it was revealed that the collapsed construction group paid subcontractors with a 120-day delay, says Paul Uppal, a former Conservative MP. Thousands were now out of pocket and some faced bankruptcy.’
We welcome his view. Small businesses are frequently plagued – indeed destroyed – by late payments.
And the commissioner, speaking in his interview with the FT, is encouragingly emphatic.
‘Late payment is one of the biggest challenges facing businesses,’ says the piece, ‘with up to 50,000 failing each year because they are owed money by other companies, Mr Uppal says’.
He says late payment is also a worsening problem, one that now needs urgently challenging.
‘He hopes the problem can be solved by “cultural change rather than legislation”’, says the FT, ‘but warns: “Ultimately if I don’t achieve this you are probably going to see legislation. There is cross-party consensus on this…”’.
According to figures published by companies for the first time in December 2017, only 29 per cent of those companies that reported at that time – and most will do so for the first time only this coming April – ‘managed to settled bills within 30 days on average, and only 52 per cent of invoices overall were paid within that timeframe.’
Paul Uppal is determined this will change. ‘We will name and shame if need be’, he’s quoted in the FT.
He’s invited big businesses to meet and discuss the issue with him.
‘This has to be a collaborative approach’, he told the FT. ‘I want large businesses to feel they can approach me and give their perspective. The door is open’, he says.
But small businesses like yours are, of course, much more vulnerable. You can feel reliant on a contract with a bigger company, and extremely anxious to do whatever it takes to safeguard that.
There’s an inherent power imbalance…
One of various issues which clearly exercise the new commissioner. Good.
There’s more on this, and updates about the specific case of the Carillion suppliers left so badly in the lurch.
It’s an interesting piece.