Small Business Commissioner Consultation On ‘Late’ Payment
As requested, I did start to fill in the questionnaire but I have multiple business interests and I am really representing the views of the many thousands of micro business owners that I am in weekly contact with on #PayIn30Days. All my businesses are with co-directors and we do have #PayIn30Days terms and pay promptly but always try to pay much quicker than that.
All our businesses have suffered from having to accept long payment terms from large organisations and pay when paid when at the bottom of a government supply chain. We pay our suppliers/providers within 30 days. We use credit checks, overdrafts, loans and reserves to do this but in the 32 years of running our own businesses, it has meant many months when the Directors have not been able to be paid.
We have never taken any of our clients to court, neither would we complain or name and shame them. It would be commercial suicide.
I hope you can admit this email into the consultation. Please let me know if I have to complete the questionnaire.
It was a pleasure meeting and discussing the #PayIn30Days campaign with you at The Small Business Show this week and I enjoyed your presentation too.
Many businesses and small business membership organisations (eg Forum of Private Business and Enterprise Nation) back the campaign (see Small is Beautiful Roll of Honour on my LinkedIn articles to be published on #MicroBizMatters Day) and some have even created websites for #PayIn30Days pledges (see Lichfield and Tamworth Chamber of Commerce).
Bill Esterson, Shadow Small Business Minister managed to get #PayIn30Days in the Labour manifesto at the last General Election and Labour have stated that any large organisation supplying Government will be ‘at risk’ of losing their contract if they do not #PayIn30Days.
It is very difficult for many small business membership organisations to complain about unfair payment terms (45 to 120 days) from large corporations as they rely on many of these large corporations for sponsorship.
Thank you for understanding the main points of my 22 years #PayIn30Days campaign which is as follows.
Late payment AND Unfair Payment Terms
Because of clever lobbying, successive Governments have assumed ‘late or prompt payment’ is a contributing factor to worsening cash flow, increased debt, reduced turnover, reduced micro business owner’ earnings (20% down over the last ten years), high failure rate of vulnerable new businesses and an inability to grow for the continually increasing 5.7 million, small and micro business sector.
Late payment is an important issue but of equal importance are unfair payment terms. 45 days to 120 days is the norm, not the exception. For the UK economy to prosper through all the new jobs, innovation and growth from the small and micro business sectors we must change the payment culture in every major sector.
Currently, at least 4 in 5 of the largest organisations in each sector will offer ‘take it or leave it’ terms of 45 to 120 days to the vast majority of their suppliers.
As you know I* am a campaigner and have sat on numerous Government committees since 1996, for #MicroBizMatters . Only a few thousand of the 5.5 million micro businesses in the UK have a direct relationship in supplying national Government bodies or the 7500 Large Companies in the UK. 75% are self-employed and 70% provide services. Their customers are mostly consumers and other micro, small and medium businesses.
They will never complain about another micro, small or medium business which is a customer but is experiencing a cash flow problem because this customer is supplying a business in a supply chain relationship which has at the top of the supply chain either a large organisation or a Government Body.
They do not blame their best customers for the unfair treatment on unfair contract terms and late payment that starts with large organisations and so, reluctantly, accept ‘pay when paid’.
‘Pay when paid’ becomes the norm for micro business owners leading to cash flow problems, loans, debt and crippled businesses.
Microbusiness owners are not naive and they have contract payment terms but they cannot afford to put their best customers into further financial difficulties by taking legal recourse or complaining to the Small Business Commissioner.
The government can lever #PayIn30Days from most Large Organisations in the UK without resorting to more legislation and codes.
Companies with over £36 million annual turnovers have an obligation to report to the Government about their payment practices. Only 318 out of the 6,613 businesses in the latest government report #PayIn30Days – offer and stick to 30-day payment terms.
As a result, £44.5 billion is owed to the 99.8% of remaining UK businesses – 5.7 million businesses.
Many of these large companies are highly profitable because of government procurement contracts, government outsourcing contracts, government funding (eg capital equipment/ buildings/subsidies/export/training) and government licenses (eg financial services/utilities/pharmaceuticals/telecom/supermarkets).
Examples of companies which benefit in this way are accountancy (Ernst & Young pays in 109 days with 75% of invoices not paid within agreed terms), utilities (E.ON 118 days & 63%), travel (Thomas Cook Group plc 88 days & 80%), Food and Drink (Carlsberg 92 days & 67%, Coca-Cola 80 days & 61%, Supermarkets average 75 days) , banking, financial services, utilities, telecommunications, public transport, tobacco, construction (Carillion had 120 days take it or leave it terms) education (especially universities), and, outsourcing (G4S, Atos, Maximus, Capita, Serco et al).
While they may #PayIn30Days a few direct suppliers in a supply chain on a government-funded contract this is the exception. The norm will be to offer ‘take it or leave it’ payment terms of 45-120 days with at least 20% delaying payment for, various reasons, beyond the ‘agreed’ payment date.
The standard for ripping off suppliers by ‘take it or leave it’ contract terms with 45,60, 76, 90 and 120 days is usually defined by the unfair practices of the largest companies in each sector. They know their suppliers cannot afford to turn down the contracts and also know that they cannot afford to complain about the unfair practices. It is bullying.
The government can stop the bullying behaviour of most of the large organisations in the UK by specifying in any contract or licence it has with these large organisations that:
they must #PayIn30Days ALL their suppliers ALL the time.
The #PayIn30Days campaign
I’ve been campaigning for over 22 years that Government should not contract, license, bailout or fund any organisation which does not #PayIn30Days ALL its bills ALL the time.
The government imposes standards for quality, size (eg resources, turnover and profitability) and deliverables which organisations must meet before the government will contract with them
It can only be the lobbying from large organisations profiting from unfair contract terms and late payment and the £billions which the financial sector makes in loans, asset finance, invoice discounting and credit cards which prevents the Government from implementing a #PayIn30Days standard. to those, it contracts with, funds or licenses.
Every year the small and micro business sector gets larger and of more importance to the UK economy. Surely it makes economic sense to get cash flowing into the 5.5 million micro businesses and help them to reduce costs.
Tackling unfair payment practices by a few thousand large organisations, which the Government has leverage and regular contact with, is the first step in getting cash flowing in the economy.
This cash will allow the 5.5 million micro (0-9 employees) business sector, which is struggling, to survive and grow.
So whilst microbusiness owners are rarely, if ever, in a direct relationship with these large organisations or government they are often supplying an enterprise which is waiting for a payment from their customer before they can pay the micro business.
The first priority for the government is #ensuring PayIn30Days contract terms from these large organisations which control the bulk of the £44.5 billion owed. The second priority is ensuring prompt payment against these #PayIn30Days terms.
Real world examples
It is important to my #PayIn30Days submission to recognise that I am confronted on a daily basis by the misery and business killing debt caused by late payment and unfair payment terms. Micro business owners trust me to keep a confidence and know that I am truly independent of government, large organisations and membership bodies.
The good news is that there are a small number of large organisations which have supported #PayIn30Days over the years and most Japanese large corporations have always usually paid within that time frame.
Unfortunately, most American owned large Corporations offer 45-120 Days terms and even some of the large organisations which support #PayIn30Days regularly delay payment even if they have 30 Days terms. Government pay in 7 days but some government bodies, including universities, find ‘legitimate’ reasons to delay payment well beyond 30 and Yorkshire in Business, the Enterprise Agency I am a Director of, has had to wait more than 6 months for payments from Government bodies that are not at the top of the supply chain.
As our annual #MicroBizMatters Day promotes #PayIn30Days globally, it is understandable that we asked all large organisations promoting the Day, buying adverts, stands or tickets should #PayIn30Days. Lloyds led the banking sector, after the crash, with #PayIn30Days and Xero and FreeAgent have been vocal in their support for it and do appear to #PayIn30Days but it has not led to #PayIn30Days being the norm in their sectors.
Many other large corporations have said they support the campaign and have attended the events on #MicroBizMatters Day including such big names as Sage and Microsoft. The reality is that only 2 large organisations in four years (123Reg part of GoDaddy and ScanSnap part of Fujitsu) have managed to actually #PayIn30Days. As a result #MicroBizMatters Day no longer accepts any sponsorship and we fund it ourselves, from our micro businesses, with a host organisation.
I’ve only met a handful of business owners willing to go through the courts or name and shame these large companies. They have much more resource and legal clout than we do. Tackling a large corporation on late payment or unfair paytment terms is usually a last resort and a desperate measure. Large organisations know this which is why they can bully. Microbusiness owners are particularly cash and time poor. They cannot afford to get a reputation for complaining or being a ‘difficult’ supplier.
I’ll finish with an example, today, of how rotten to the core the payment culture is in the UK. Every organisation knows how tough it is for the self-employed and micro-business owners so many businesses feel able to bully us. A freelance videographer has recently completed a large project for a large organisation. Their payment terms, which he had to reluctantly accept, are 60 days. The finance department of the large organisation has just called him and said they’d “pay him in 30 days if he accepted a 10% discount on his invoice”.
*Tony Robinson OBE is known as the Micro Business Champion. Since 1996 he has campaigned for #PayIn30Days through representation on many government committees (eg Council for Excellence in Management and Leadership, Ethnic Minority Business Task Force, Cost of Regulatory Compliance), consultations, and surveys in various roles. These roles have included Founder and Chair of the Government recognised SFEDI Group (includes the Institute of Enterprise and Entrepreneurs), Vice President of the National Federation of Enterprise Agencies (now NEN), Vice President of ISBE, and Investors in People Small Business Champion. Currently, he is Co-founder of the annual #MicroBizMatters Day, Co-Chair of the multiple award-winning, Yorkshire in Business enterprise agency, Patron of the John Cracknell Youth Enterprise Bank and a judge for the Great Britain Entrepreneurship Awards. He is proud to be a multiple business owner for three decades
Tony Robinson OBE
The Micro Business Champion
Speaker, Writer, Broadcaster and Campaigner
Co-Founder, Enterprise Rockers CIC and #MicroBizMattersDay
Patron, John Cracknell Youth Enterprise Bank; Director. Yorkshire in Business Ltd
Founder & Co-Owner SFEDI Group and Co-Founder IOEE