Barclays’ latest report into unpaid invoices and late payments makes for uncomfortable reading, as did the FSB report.
Barclays says 3 in 5 businesses are waiting for money to be paid and stressed as a result. The FSB says 440,000 could go bust because of poor payment practices. But there was a slightly different point from the usual, made by respondents to the Barclays’ survey which I’m interested in:
More than half of adults in the UK (58%) said they would boycott a business if they knew they were a late payment offender and of those who have been on the receiving end of poor payment practice, 8 in 10 said they would refuse a job with a potential customer if they were known for paying late.
Is the worm turning? Is the talent beginning to call the shots? Or perhaps beginning to think about pushing back against their tormentors?
At the end of November Make UK told us that small firms in the manufacturing sector were reporting to them that they were refusing work with poor paying bigger customers. Fhaheen Shah at Make UK says:
“Increasing delays in payments and deliveries between suppliers and customers poses an existential threat to some of the UK’s most vulnerable small firms. As a result 8 in 10 manufacturers are taking retaliatory actions, such as blocking entirely customers guilty of poor payment practices. If this trend continues salvaging damaged relationships may prove difficult, ultimately stunting the growth of the UK economy”.
Payments are a minefield. Poor payment practices cause uncertainty and that’s what makes the situation existential for small firms. Without certainty you can’t plan, invest or grow, and often can’t survive. That uncertainty also causes serious mental health problems for many, and we must change things. We must have fair payments for our small and micro businesses, sole traders and freelance workers. They are the lifeblood of the UK economy and drive innovation and job creation. And cashflow is their lifeblood. When it runs out, they fail.
The other side of that coin is that talented freelancers, sole traders and micro-businesses are the lifeblood of their bigger customers. That talent drives the success of the bigger firms they work with, with ideas, creativity, sharing different ways of doing things more efficiently and effectively. However, the supply of talented freelancers is tight. Demand is beginning to outstrip supply, so wages/fees are creeping up according to Runar Reistrup of YunoYuno. He says:
“We’re beginning to see freelance rates going up as firms are forced to compete for their skills, experience and creativity. That in turn means that great talent has the power to negotiate better payment terms or to refuse to work with poor payers. The tide is beginning to turn, but what will really change the dynamic is that in the coming years young people entering the freelance workforce are more entrepreneurial, confident, demanding and determined to get paid their worth and on their own terms. I’m optimistic”.
I can’t help thinking that culture change will be driven by the talent but that will take time. In the meantime, we really can’t afford to let 440,000 small firms go to the wall because we allow big customers to carry on paying late, delaying payment, not paying at all, or offering long payments terms (we heard 150 days recently. 5 months!). It’s unacceptable and contributing to the growing wave of mental health problems. Pay up and pay quick. If not, everyone loses.