late payment invoice past dueMore than 25% of West Midlands firms polled in August by the Birmingham-based company Bibby Financial Services said late payment of invoices continues despite the introduction in March of the EU’s Late Payment Directive, which aimed to change the late payment culture in the business world and force companies to cap maximum contractual periods at 60 days.

This unethical practice also threatens the payments to their suppliers who suffer in turn – at the hands of the economically powerful.

Central government practice improved

Central government has improved its practice and made a commitment to pay all Whitehall invoices to small firms within 10 days under an initiative called the Prompt Payment Code. The FSB wants all public agencies to follow the lead of central government.

But its threats failed – will fines work?

However in August the Hilton-Baird business finance blog reported that Vince Cable is now considering ways to fine late paying companies as the government looks to address one of the greatest challenges facing British businesses at present. He has asked officials to look at whether a levy could entice ‘tardy’ companies to improve their payment practices, after threats to name and shame members of the FTSE 350 who refused to sign up to the voluntary Prompt Payment Code were ignored by all but 72 of the FTSE 100 and 71 of the FTSE 250.

So what is the answer?

The Post quotes Bibby’s West Midlands spokesperson Sharon Wiltshire: “Firms should seek advice on the best means of getting any overdue payments in. But the legal enforcement of legislation is a problem for the small and medium company:

  • It is too expensive.
  • It is too time-consuming.
  • There is a reluctance to take an action which will lose them a customer.

Go it alone?

The Dutch engineering industry did not wait for legislation. They set up an industry-regulated payment routine years ago

My engineer neighbour tells me that in his dealings with Holland he has found that the Dutch engineering industry’s system works well. 30% of the full amount due is paid immediately, and then 30% is paid on completion of the job. The final amount is deemed to be the profit and follow later within a stipulated time frame. This does help to avoid the cash-flow problems afflicting those in this country who often have to wait for three months – and more – before any payment is made.

Enough said!

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