Small firms urged to pay promptly

In the interests of creating a prompt payment culture where everyone coughs up cash in a timely fashion, the Better Payment Practice Group (BPPG) is calling for small businesses to pay suppliers on time.


In the interests of creating a prompt payment culture where everyone coughs up cash in a timely fashion, the Better Payment Practice Group (BPPG) is calling for small businesses to pay suppliers on time.

In the interests of creating a prompt payment culture where everyone coughs up cash in a timely fashion, the Better Payment Practice Group (BPPG) is calling for small businesses to pay suppliers on time.

‘According to research conducted earlier this year by the Credit Management Research Centre at the University of Leeds, 80 per cent of domestic sales by UK companies are on credit terms rather than pre-payment or cash,’ explains Kate Beddington-Brown, Assistant Director General of the Institute of Credit Management and member of the BPPG. ‘Paying and being paid on time is therefore essential to the heath of UK economy and it is vital that directors and senior managers encourage a culture of prompt payment within their companies.’

The BPPG recommends that small businesses:

  • Have a management policy on prompt payment of bills and ensure that the finance and purchasing departments are committed to it.
  • Agree terms of payment at the outset.
  • Monitor their payment system regularly.
  • Make sure that invoices are processed in time to meet due dates.
  • Agree realistic contract terms with suppliers.
  • Have a system in place to deal with disputes quickly
  • Tell suppliers the name of the person responsible for payments.
  • Make sure computerised payment systems can be overridden if necessary to comply with agreed terms.
  • Have efficient collection procedures in place for sales to promote healthy cash flow in both directions.
  • Consider enhancing processes through the use of information technology and ePurchasing.

The BPPG cites the following advantages to paying on time:

  • Suppliers will be keen to work with you.
  • You avoid costly late payment charges or compensation claims.
  • You save on firefighting and strained relationships.
  • You approach suppliers and customers on confident terms and build their confidence in you

And the following disadvantages to paying later than agreed:

  • It weakens your organisation because it harms your reputation;
  • It damages your supply sources and strains your relations with suppliers;
  • It weakens the economy as a whole because it constricts growth;
  • Late payment is often taken as an indication that the buyer is in difficulties. If you create this impression with your suppliers you may find that their terms worsen.

Further information on speeding up payment processes can be found at www.payontime.co.uk

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