James Blackman 'Counting the cost of late payment' Podcast
Last week Cocoonfxmedia's James Blackman featured in episode eight of The Chamber Podcast where the focus and topic of conversation was around late payments and the effect they have on SMEs and other businesses.
Dan: Welcome to episode eight of "The Chamber Podcast." Late payment is a major issue for small and medium sized businesses across the region. Come to the launch of a campaign by the Lichfield & Tamworth Chamber of Commerce encouraging businesses to pay their suppliers within 30 days. We'll be finding out more about the pay in 30 days pledge and what businesses can do to encourage prompt payments. I'm Dan Harrison, press and PR executive.
James: I am James Blackman, Lichfield & Tamworth Chamber of Commerce.
Simon: And I'm Simon Chapman, president of Burton & District Chamber of Commerce.
Dan: A survey revealed that on average £200,000 is regularly owed to businesses for late payments. In some cases, companies are made to wait 90 or even 120 days for payments for products or services. James, pay in 30 days has been a big theme of your presidency of the Lichfield & Tamworth Chamber. So could you just kick off by telling us a little bit about the pledge.
James: Yeah, sure. I thought of this pledge with myself as a business owner and having the stress and worry of not being paid on time. And I found that a lot of my clients, and other businesses and small businesses, were having problems with late payment, which in turn affects cash flow, affects your health, affects the local economy, and generally it's just bad practice not paying within those, sort of, 30 days.
Simon: I think payment, agreed payment terms and sticking to them is absolutely vital.
James: Yeah, totally. And it's staggering how many businesses seem to think that 60, 90 days is actually okay. I've been on financial training courses where financial controllers are actually encouraged to withhold payment to suppliers to increase their own cash flow. But that has a nothing effect over the sub-economy.
Dan: Although the pledge isn't legally binding. I mean, you just mentioned not being good for your health and the health of the local economy. I mean, that shared understanding between businesses, that's so important, working together really for the benefit of the local economy, isn't it?
James: It is, and it's having a think about really what impact it has paying someone late on their payment terms, even if it's 45 days, 60 days. Because what tends to happen with smaller micro-businesses is that they wait to get paid, then they pay their suppliers, and then it just has a trickle-down effect all the way through the economy. That overall affects even the high street, because if there's less cash flow in small businesses, there's less chance of having higher wages, which means there's less disposable income to spend, and then the shops suffer from that, and then the wider economy suffers from that as well.
Simon: I think it's quite interesting, James. They, you know, just mentioned a point now with shops. There is no pay in 30 days when you go shopping, it's pay now.
Simon: And I think businesses need to ensure that they manage their cash flow well. We as a business here at Yee Group, we will ask clients for payments upfront if, a, if they don't have payment history with us, good, you know? And so we'll ask them for a...certainly a contribution towards a project that we might be undertaking for them and that certainly assists with our cash flow. And we are quite strict with our payment terms. And I think businesses are frightened to actually say to somebody, "I can't do work for you unless you pay me on time." And they then spiral and do more work. You've go to be very careful you don't self yourself down a rabbit hole where you just get deeper and deeper into debt with a customer. So you've got to have that confidence to say, "Enough is enough actually. I need paying."
James: Yeah, and it's...I mean, particularly in the creative industry, which is where Cocoonfxmedia is from, is that often the value isn't seen on what we do and we're often put to the back of the pile. And some of the projects can be tens of thousands of pounds, and for a small business that's...it could be 80% of their turnover, maybe more. And if they are not paid on time or they're just not seen as important, then it just is bad business. And I think it's also ethical as well that if businesses have a good payment plan and policy, it just makes better business, a better...a level playing field.
Dan: But also, for small businesses, I mean, it really can be the difference between success and failure.
James: Yeah, I've got a good example of one of my clients. He basically went under where he was asked to supply a big multinational with some hardware. He went and purchased that on credit, on a 30, 45-day payment terms. He supplied the goods to his supplier. Because the supplier gave him the wrong PO number, it meant that then his payment got delayed from originally 60 days, to 90 days, to 120 days. And then...
Simon: Totally unacceptable.
James: It is totally unacceptable. They have the goods. His suppliers called in their debt, and it was a substantial amount of money, which meant he had to go into liquidation. They still had the products and technically it was theft. And this is a big multinational company. I've had other friends who own businesses who refuse to work with big household names because he is basically bankrolling their business.
James: And that's, I think, where that needs to change.
Dan: Simon, I know you've got a practical example of where you've been able to negotiate the term of payment with a major company.
Simon: Yeah, absolutely. We worked for one of the national brewers and we did our quotation. Our quotation's standard are 30 days payment terms. We were successful in winning the work. So yes, we're really pleased, we rung the bell in the office. And then the purchase order came through, payment terms 93 days plus.
James: Plus, that's just so wrong.
Simon: It is just wrong absolutely, James, you're absolutely right. And so pick the phone up to the person we placed a purchase order, the place of purchase and said, "I'm really sorry. We can't work under those terms," you know. And he said, "Why?" I said, our purchase terms are 30 days." I said, "We simply cannot do the work." "Let me go away and have a look at it." And they came back and said, "Well, we can do it. We can pay you in 45 days." Massive difference, and it's just being confident enough to say, "No, it's still not 30 days." But actually, they did pay in 45 days and we are confident about that.
James: I think that's...what Simon is saying there is totally right just that you as a business owner and a small business have the right to choose who you work with and demand your own terms. If companies are going to pay in 90 days and you're willing to accept that, that technically could be your, sort of, not death bed, but nail in a coffin in the business if your other suppliers don't pay on time.
Simon: Look at Carillion. Carillion is just the example of the time where suppliers were having to wait over 120 days. Local, lots and lots of local businesses have gone under. And that's livelihoods affected, families, you know, it's tragic. And it is vital that the government do their inquiry, understand what's going on, and ensure that we don't find ourselves in this position again. And I applaud you, James, and your chamber for pushing the pay in 30 days. Out there to people are listening to this, you know, make sure that you don't leave yourself too exposed. You're better to walk away from the work than take work under payment terms that aren't acceptable because we do not want more Carillion. So that would be my advice.
James: Thank you, Simon. And just on one thing, it's these larger companies, if their executives were paid in 120 days, they would actually walk out of their business. So from an ethical point of view, would you pay your staff in 90 days, 120 days? You wouldn't. You wouldn't have a workforce. And that's where micro-businesses and small businesses actually shore up the economy. And if they're paid on time, it means everyone gets paid on time and it's better for the economy.
Local late payers
Dan: On a more local level though, there's the obvious need for cashflow, but there's also the trust factor as well.
James: Yes. If, I mean, if you enter with an agreement with a company and you say, "Okay, my invoice terms are 30 days," and they come back and on the 30th day, you still haven't been paid. It sort of...it feels like they have upset you personally.
Simon: It breaks up trust personally. And I think when you've gone and done a really good job for a customer it is ethically right and it is professional to pay on the agreed payment terms. And, you know, we have got to push that message out there to the people and say, "You know, it's not acceptable. And actually, you are not a good business to work for." And in my role as president, if I have companies that haven't paid in the right time, I will tell other people that we don't work for them anymore.
James: And it's...I feel that's perfectly good point and I agree with that totally. And it's...technically, I see it as theft. They're taking your services for free.
Simon: It's only theft if you don't pay, James. It's the, you know, and I think most...a lot of these companies do pay. But they're just using us to be a banker and we are not a financial institution. We would have to, if we weren't paid on time, you know, we might have to go and borrow that money and I don't want to be doing that for bankrolling another business. So I think it's really important that we push out this pledge that you've got out there, James, and we ensure that we push it out to all businesses. Whether that's a local council, the larger organizations, because I think it's the large organizations that are creating a lot of this payment issue.
James: They are, and it's mostly protecting the shareholders. Everyone wants good profit, everyone wants a good balance sheet. But it's good ethics. There is the delayed payment legislation where you can charge per day afterwards. But actually trying to get paid for an invoice and then stick an extra eight percent a day on top, it's just not going to work. So I think there needs to be a change at government and they need to start pushing out for it. And know that there, for larger companies you have to note in your annual returns why you are late on payments and want your payment terms up. But I think now is the time, with the likes of Carillion and these larger businesses, that they can make a massive impact in the economy by just reducing their payment terms.
Simon: I think that's what this is about, isn't it? It's improving. We've got a great country. We've got some fantastic businesses out there. Let's work more together, let's help each other, let's not make it painful. Because spending time chasing money is not good use of resource, it's not a pleasant thing to do, and we can all make our daily lives a lot more pleasant if we got paid on time.
James: And I totally agree. I've got one good example with us. We reduced our payment terms of bad debt from 54 days down to 34 days and that actually allowed us to employ two extra staff. So having that extra 20 days better in your cashflow has a massive impact on small businesses.
Dan: So there's plenty here to ponder for businesses who've been affected by late payment. For more information on the pay in 30 days pledge, contact James or the executive committee at the Lichfield & Tamworth Chamber of Commerce. James, Simon, thank you very much for joining us on the latest episode of the Chamber Podcast.
We'd love to know what you think about late payments, what you do to combat your late payers and if they have effected your business in anyway. We are in full support of the Pay in 30 days campaign and you can join it here. Get in touch with us via twitter or Facebook and let us know your thoughts!