Business ethics matter! Payment of suppliers
One really important and visible sign of how ethical you are as a business is how and when you pay your suppliers. Late payments reflect badly on the leadership and prevailing culture of a business.
When you decide to work with a contractor you create an underlying principle of Trust. Trust that they will deliver the service or goods to the agreed standard and on time and in return you pay them what they are owed and on the due date.
Customers paying late creates huge problems for all businesses but especially for small businesses which often have less money put to one side to deal with delays. It leads to business owners going unpaid and ultimately the failure of the business after the stress gets too much for them.
Smaller businesses often have less power to demand more reasonable payment terms from larger suppliers, who play on the fear of losing the contract.
Add to that small business owners are more likely to want to pay their own suppliers on time as reputation and relationships are valued more highly in the small business community.
What is considered best practice for customers?
- Pay your suppliers on time (due date or before);
- Pay all suppliers within 30 days;
- Have clear contracts in place to agree terms at the start of the job.;
- Clear communication if there are likely to be any delays in payment;
- Deal with disputed amounts quickly.
As a supplier – what can you do to minimise the risk of being paid late
- Check out the companies before you work with them – credit checks and Govt service https://www.gov.uk/check-when-businesses-pay-invoices
- Signed contracts/engagement letter;
- Clear terms;
- Invoice as soon as you can;
- Charge late payment interest;
- Set credit limits and stop supply;
- Have a named person who is responsible for the payment;
- Payment terms of customers shouldn’t be longer than for your suppliers;
- Deposits and staged payments;
- Increase payment options – Crezco and GoCardless;
- Payment reminders, debt collection procedures and use of the Small Claims Court;
- Try to build a storm fund to cushion the delays.
We should treat our supplier better than we expect to be treated and we should call out bad behaviour when we see it.