The truth about late payment

On the day the EC launches a new UK campaign, one-man band Oliver Bennett reports on the problem of late payment.

by Oliver Bennett
Last Updated: 14 Jul 2014

I have become part of the stupid club. I am owed money – again. This time, it started in late summer, when I took on a project. We agreed on £2,000.

I did the work and I’m still waiting for the money.  I’ve sent chaser emails, and have been fobbed off – it’s eternally ‘on its way’ like a rogue minicab. So I vented on social media, and got some fabulous responses: ‘send him a photograph of you in tears’; "sit in reception"; ‘break his legs’ and (sensibly): ‘send a formal email following legal advice firmly asking for a date for payment or further action’. And of course, the dear old Small Claims Court.

All require time and energy. So it was salutary to find that the European Commission's UK Late Payment Campaign launches today. It’s mooting a new European directive (stay with me…), with small businesses in mind, on the reckoning that 3.7% of total turnover in the UK is lost to late payment, with average payment duration at 41 days.
     
Of course, it’s a bummer and we self-employed people can be avoiders and comfort ourselves with myths. Such as: it’s in their bank so it’s safe. That it’s not cool to chase, because they might not employ you again. That it’s all too bloody English to ask for your money, even that your employer is a (sort of) friend and you don’t like to ask.

Well, balls to all that. It’s our money, held by someone else. No dentist or supermarket would accept 90-day terms. "At times it feels a bit like we’re a small bank for larger companies who think that they can pay us when it suits them," says  Lucy Davison of her seven-year-old company Keen as Mustard Marketing. ‘When we chase they tell us the invoice is in "next month’s cheque run", often giving us 60 or 90 day terms.’ A ‘cheque run!’ The very term is archaic.

True, late payment is often part of ever-more Byzantine contractual chains: people invoice sub-contractors, who then defer to the top of the chain. Result: months without money and further potential for manipulation. ‘We’ve had clients withholding payments on signed-off projects, because they wanted ‘further changes’," adds Davison.

As a self-employed writer and editor, I’ve seen payments drip into years and many more complete the six-month marathon, and I’ve spent hundreds of business hours chasing earnings.

‘SMEs spend around two weeks each year chasing unpaid invoices,’ says Marlon Wolff of small business advisors Ingenious Britain - and it’s worse for us little guys, who ‘deserve to be treated fairly and paid promptly.’ True, and sadly, earlier initiatives such as 2008’s voluntary Prompt Payment Code have proved utterly toothless.

One can turn to the small invoice chasing market. For example, Barnaby Lashbrooke of Time Etc chases late payments for  small businesses who ‘assign about four hours per week to credit control’. He says ‘most businesses don't have the time to chase late payments and would rather concentrate on business.’ That’s true for me. Still, Lashbrooke finds that it only takes one polite nudge to get clients to pay up,

So, what’s in this new directive? That we’re going to be able to claim interest for late payments and gain minimum fixed amount (€40) to pay for payment recovery; that public authorities must pay within 30 days and enterprises within 60 days. Lashbrooke, at the coalface, suggests an ombudsman be placed with special responsibility for persistent late payers and that SMEs should get credit scores for quicker payments, gaining reputational advantage.

In the meantime, there’s only you, and as Davison says: ‘Be really on it. Chase as soon as the payment is due. Keep following up.’ Be clear about the payment terms and ‘be a pain’. Finally go legal, which I’m currently girding myself to do.

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