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.
