Late Payments, Debt Recovery and words not action from Cabinet

Many would be forgiven for thinking that the latest Naming and Shaming plans of the Government in order to tackle corporate late payers, has all the dragon slaying properties of a chocolate fireguard.

You may detect a hint of cynicism and whilst the government (past and present) has made efforts to reduce its own failings in order to pay its own suppliers on time, it has done next to nothing to bring about real change in the private sector.

This is the private sector which is expected to pick up the slack and magic up 500,000 new jobs in the next 12 months. The same private sector, which according to the banks have no appetite to grow or borrow money?  It is also the same private sector which is home to 4.8 million small businesses collectively owed £24bn in late payments, with the UK’s larger businesses firmly rooted at the top of the frequent late payers list.

But the real numbers lie in the fact that UK small businesses provide 60% of all jobs to the UK work force and they contribute half of all the UK’s total income (i.e. GDP). So, with the stakes so high, why is the government just re-booting, re-imaging, or re-naming the Prompt Payment Code, and throwing in a bit of Trip Advisor style Name and Shame too?

Cabinet Secretary Francis Maude has said that big corporate businesses, whom don’t pay smaller suppliers on time, will soon be named and shamed on the Cabinet Office website. This is the same website that has no reference to late payments at all, and the same website that doesn’t attract the same amount of small business owner/manger visitors as say Business Link. It is almost as if they want to make the smallest token gesture, and put it where no one can find it just so they can get the headline now, and no scrutiny later?

Website aside, let us ponder the reality Mr Maude is expecting the UK small business community to accept.

He is suggesting a scenario of a typical SME entering into a new deal negotiation with a company the size of say Marks and Spencer or BT for a deal worth say £10,000-50,000 a year. BUT crucially, said SME then goes to the Cabinet Office website (if he can find the page), and discovers to their horror that the potential new corporate client has been named and shamed as a late payer.

So Mr Maude, on discovery that the new corporate customer pays their invoices late, and is on the Name and Shame list, what exactly happens next?

Does Mr Maude suggest that the SME turns down the contract, and that the corporate late payer is so ashamed of their actions they agree to change their wicked ways and pay up on time?

Seriously?

If the SME supplier was the only supplier capable of delivering to the late paying corporate, then maybe, but in reality how many industries, or how many products and services are supplied by just one company in a monopolistic market?

Is it not more likely then, that if an SME turned down the large corporate that there would be hundreds of other similar SME’s waiting in the wings? What incentive is there for the late payer to change their ways, knowing that if one SME doesn’t want or can’t accept 30-60 day late invoices that many more lie in wait.

Turning away business

Given the current climate, would it not be more likely that most, if not all SME’s would look at the likely outcome and say to themselves that a new contract worth £10,000-50,000 albeit paid up to 60 days late, is better than no new business at all?

If you wish to engage CCDR to help protect and shield your business from late payments or your debtors going into liquidation, call us today and we can assist you in being proactive to reduce future bad debts through services such as our Outsourced Credit Control, or for those where the debtor isn’t paying, we have a range of services such as Debtor Tracing, Debt Mediation or Debt Recovery depending on what stage your late payment problems is affecting your business.

CCDR is a leading UK Debt Recovery specialist with international reach and a client base of SME’s and multinational organisations.

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