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| Why you should pay your invoices on time |
| As well as being unethical, the practice of deliberately paying later than the agreed terms is wrong for sound economic reasons:
Late payment can also be symptomatic of poor relationships between you and your suppliers. The way you manage your purchasing/sales relationship is important to your profit margins. A commitment by you to prompt payment can be a powerful aid to better buying; it will certainly produce closer, more co-operative partnerships between your firm and your suppliers. Large corporations in particular enjoy considerable purchasing power. That power carries responsibility. The flow of cash in the economy begins with large organisations and should cascade, not trickle, down the chain of suppliers. Paying on agreed terms injects more money into UK industry; existing suppliers are kept healthy; new firms are encouraged to compete in the supply arena; buyers benefit from a wider range of supply sources and the UK economy becomes more competitive in the world market. |
| Better payment helps build a better business |
Business and economic benefits of paying on time You can gain in reputation and buying power when you commit to prompt payment Why?
Extra benefit to your company Your suppliers’ incentive for reliability will enable you to give reliable service to customers and help you to improve your terms. Closer cooperation with your suppliers can lead to wider benefits like suggestions for more efficient delivery patterns, or new insight into alternatives for components or supplies. Customers with concern for efficiency and responsibility in business practice will reward your commitment. |
| The Better Payment Practice Code |
Over 1,400 companies have already made the commitment to prompt payment for the benefit of their business. They have signed up to the Better Payment Practice Code established in 1998 by business and government together to help improve the payment culture amongst organisations trading in the UK. The Code is supported by public as well as private sector organisations. Collectively they represent about 20% of UK Gross Domestic Product. This simple code details the following obligations of a business to its suppliers:
To see who has signed up to the Code you can find the complete list of current signatories here. |
| Helping the UK economy |
By working together to change a culture of late payment, businesses that pay promptly are keeping existing suppliers healthy, encouraging new suppliers and helping to make the UK economy more competitive in the world market. Some food for thought: One in four business failures are a direct result
of interruptions to cashflow 90% of business owners say that
they would pay their suppliers on time if their customers paid them
on time Over 40% of small to medium sized enterprises would stop doing business
with a customer that paid them late Only one third of PLCs pay their bills within 30 days and over four
years there has been no improvement in average payment times of plcs |
| How to get started in a small way |
Have a top management policy on prompt payment of bills. Ensure that all staff are aware of it –especially but not only those in finance and purchasing. Agree terms of payment at the start of all contracts. Monitor your payment system regularly for timely payment of invoices Have a good system for clearing disputes quickly. Foster good relationships with suppliers by informing them of your payment procedures and who is responsible. Promote healthy cash flow in both directions with efficient collection for your own sales. More information on all of these areas is available here |
