New voluntary prompt payment code in the UK won’t work
The Government’s launch of a voluntary law on payment terms to encourage the prompt payment of bills between businesses as firms across the UK battle to survive rough economic straits is unlikely to spark a genuine move away from late payment culture in the UK, warns large credit agency Graydon UK.
The voluntary code, announced this week, aims to prevent companies from reneging on agreed payment terms. This practice is (unfortunately) quite common among large corporations in the UK, with Alliance Boots and Tesco amongst the worst offenders.
The announcement follows the recent publication of research conducted by the Forum of Private Business sadly revealing the ugly truth: that 61 per cent of small firms in the UK are encountering troubles managing cashflow compared with the first week of November.
However Graydon UK is not convinced that the proposals will turn the tide of the late payment of suppliers in the UK, particularly in instances where small firms are the victims. If it’s voluntary, they’re likely to simply ignore the new code.
There’s no doubting good intention lies behind the Government’s introduction of a voluntary code but it is highly unlikely that this latest move will make a tangible difference when it comes to helping small companies manage their cashflow. Laws across the world are rarely an impetus or an incentive as a business tool, and this one won’t be either.
The economic situation has grown worse, and even large corporations no longer have the readily available cash required to pay bills and are failing to pay trade invoices simply because they can’t do so, and no voluntary code will change that simple fact.
Tags: bad credit, contract phones with bad credit, mobile phone no credit checks
Dec 18, 2008
Late payment of invoices is a worry for many businesses. I saw a figure recently saying that 1 in 10 businesses are in danger of closing due to poor cash flow. Late payment has been a financial management tool for some for a long time. The difference today is that ruthless management fired by profitability has been replaced by the need to use a supplier’s money in order to fund operating costs and wages. We have set up due2pay specifically to try and level the playing field and help businesses get their invoices paid on time. ( by the date agreed with their cusomer ).
Many new start ups are by people who are enthusiasts in their chosen field, design, engineering, gardening, wood working. These people are at the mercy of today’s business environment. Many do not realise the impact of giving a company an extra month of credit. Until they themselves go to the bank for credit to find out what it costs to borrow £10,000 for a month will they realise why they themselves have cashflow problems. A well known statistic is going round that 1 in 10 businesses are in danger of collapse due to cash flow problems. The SMEs need to be alert to those that will take advantage, they also need to hand over the handling of finances to their staff who deal with it on a daily basis. They need to ask their staff to be on the ball on their behalf.