Pay late and risk being cut off by your suppliers
Research carried out by the Better Payment Practice Group (BPPG) has revealed that businesses’ tolerance of late paying customers is low, and that the majority would choose to terminate their relationship with tardy payers, rather than suffer future payment problems.

The survey, carried out in July on the BPPG’s website, www.payontime.co.uk, asked visitors to state whether they would deal in future with a customer who paid them late. Over two thirds of the 1,200 respondents said that they would not trade with a late payer again.

The BPPG is therefore advising all businesses to adopt a clear internal policy on the payment of suppliers. This should include clear written instruction for finance and purchasing staff on how and when suppliers are paid. It is also important to encourage close communication between the buying and payment functions to prevent accounts falling into arrears and straining supplier relationships.

Commenting on the findings, René de Sousa of the Chartered Institute of Purchasing & Supply (CIPS), said “Unfortunately, too many businesses in the UK are relying on credit from their suppliers to keep their own cashflow healthy, without giving proper consideration to the potential damage they are inflicting on these important relationships. As this research shows, late payers run a real risk of being cut off by their suppliers, leaving their supply chains vulnerable. This can be disastrous if the withdrawn goods or services are essential in enabling the business to meet demands from its own customers.

“Businesses need to resist the temptation to lean on suppliers for credit, and recognise instead that there are often real financial advantages to paying on time, such as preferential rates or service for prompt payment.”

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