Legal Recruitment from Ten-Percent Legal

Wednesday, June 03, 2020

Large Companies and Invisible 90 Day Payment Policies

 
This has happened to our companies so many times over the years that we almost sigh whenever a large organisation or company wants to do business with us. We know that although there may be plenty of work coming our way, we are not going to get paid for a substantial period of time afterwards.

Example

Take recent work for a university. We undertook their order, spent considerable time making sure that everything we were doing was satisfactory for them, the institution had specific requirements that resulted in us needing to invest in further technology and software updates, and we completed the work as they requested. The invoice we submitted was not substantial and we had costs ourselves that had to be met out of our accounts whilst we waited for payment.

87 Days - a pure coincidence?

Our payment terms are 21 days. We got to the end of the 21 days and issued our usual set of reminders, one after 7 days, another one 7 days later and a final one 7 days after that. This took us to 42 days and there was no correspondence or communication at all from the university. We then entered the credit control process with this institution whereby we sent them a statement indicating the interest and costs that were going to have to be applied if we had to take this further to court level. Still no response.
A further letter was written to the institution advising that unless payment was made within 7 days we were going to have to issue proceedings against them, and we still had nothing back from them. We were just thinking about what to do next, as to take a large client to court can be similar to cutting your nose off to spite your face if all future business from them ends, when after 87 days the client paid up.

Xero Tool

One of the very handy features of Xero accounts software (we thoroughly recommend it, although their customer service seems to range from non-existent to 'sort it out yourself') is that it indicates to you the average time it takes a client to pay, and when we looked at this particular client there was a very clear pattern showing that the client regularly pays at around or just within 90 days. This had happened again here.

Boot on the Other Foot

I have often wondered how these companies work the other way round – if for example with the university one of their students didn’t pay within the time of the invoice, would the university allow them 90 days to pay in the same way they have allowed themselves 90 days to pay our invoice? Or would they come down on them like a ton of bricks and be either throwing them off their course or issuing court proceedings against them if payment was not received in time?

How to Deal with 90 Day Terms? live with it

The key to working with these companies and institutions is just to accept that someone in the purchasing and supply section has come up with the wonderful idea of not paying anybody for that length of time, thus showing a higher level of cash in the bank for those months and gaining extra interest on any sums retained for that period.
There is no option for smaller businesses to do this because larger companies simply would not deal with them again, or go after them for the money very quickly indeed.
Take Reed the jobs board. If they do not receive payment against their invoices within 48 hours they send out a reminder and start bombarding the clients with emails asking for payment. I would hazard a guess that a supplier to Reed would probably not be afforded such generosity when submitting their invoices.

Summary

Clearly the government legislation aimed at ensuring larger business cough up when they should fails completely, because enforcement is dependent solely on the courage of smaller businesses to speak out against the larger companies or organisations, and regrettably, us included, most choose not to do so.


Jonathan Fagan is Managing Director of Ten-Percent Legal Recruitment and a non-practising Solicitor. Ten-Percent Legal Recruitment provides online Legal Recruitment for Solicitors, Legal Executives, Fee Earners, Support Staff, Managers and Paralegals. Visit our Website to search our Vacancy Database. Our Legal Careers Shop has eBooks on CV Writing for Lawyers, Legal Job Interview Guide, Interview Answers for Lawyers, NQ Career Guide, Guide to Finding Work Experience or a Training Contract and the Entrants Guide to the Legal Profession.

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