Unofficial credit providers?
Late payment has always been an issue for small companies and in the current economic climate where cashflow becomes even more important then it’s really important that SME’s are on top of their credit control procedures.
It’s one of the first areas that I look at when I get involved with a business – looking to reduce bad debts, improve cashflow and hence facility costs.
However, when large businesses impose payment terms on their suppliers there is little that one can do except grit your teeth and put up with it.
There are plenty of stories around about large retailers demanding a contribution towards marketing costs from their suppliers as a way of getting higher discounts or businesses imposing extended payment terms of 60, 90 or even in one case up to 105 days!
However as one company found recently sometimes it is worth challenging these practices – one big High Street name recently announced that they would extend payment terms to 75 days after the end of the month in which an invoice was dated, and also introduce a settlement charge of 2.5%!
One small business challenged this, was rebuffed initially but then managed to persuade the large firm to amend its terms … for them at least. Whether they will get more business remains to be seen – but why should SMEs act as unofficial credit providers for large businesses in the first place?
