EOW Reflections: Lessons learned

We’re learning every day in the OSBC Team. Unfortunately, many lessons are around why businesses fail to pay each other quickly and fairly. Please don’t read this and decide to use some of the ploys outlined here. We’re on the case. 

Firms have been telling us they pay their suppliers in 30 days. We’ve been asking the suppliers. They’re telling us they get paid 30 days end of month. That means payment could take anything up to 31 days longer to arrive than 30 days. 61 days isn’t 30 days. The same applies if you’re paying in 60 days end of month. That could mean payments take up to 91 days and 91 days isn’t 60 days. It isn’t just bigger firms that aren’t paying as quickly as they claim. In most cases there’s no intention to pull the wool over anyone’s eyes. Many processes have been in place for years and unless time and effort, and sometimes quite a lot of money, is spent to bring processes up to date, the 60 or 30 day targets will go on being missed. The supplier who was expecting money to arrive in 60 or 30 days is left waiting, unable to pay their own bills or grow their business. What we’ve learned is that firms don’t realise 30 days end of month isn’t the same as the 30 days in the rules. 

Then there are firms with convoluted approvals processes. Their procurement people think the firm pays in 30 days. The Accounts Payable department does pay in 30 days. The firm reports that it pays in 30 days, but no one counts the lengthy approvals period in the middle. People come in, do their own jobs in their own silos and go home again without having a complete picture of what the supplier experiences on the receiving end. For us it’s the total length of the process that counts, from the date the invoice is received into the customer’s organisation, regardless of which department receives it, through to the money arriving with the supplier. We’ve learned that many firms really do think they pay in 30 days because they only count the days taken by Accounts Payable. Again, that’s not the 30 days demanded by the rules. 

And then there are the firms that simply make the payment terms in the contract longer so that they are never guilty of paying late. If their processes won’t allow them to meet the 30 or 60 day deadline they rewrite the contractual payment terms to read ‘payment in 90 days’. That makes them less likely to be late with payments and billed for interest and compensation.  

Where is all of this leading me? We’ve been deluged with applications for awards from the new Fair Payment Code (FPC). Most applicants are under the impression they are doing the right thing and paying fairly and quickly. However, we’re finding some of the above practices and other workarounds, which means applicants don’t reach the Code’s required standards and won’t be joining the Code. The good news is that we’re convinced that firms can reach the FPC standards with time and tweaks, and we’re determined to help them get there.  

When it comes to payments, applying for an award from the FPC has the added bonus of giving you free consultancy on how to improve your payment practices and practical help to get you there. You benefit from better payment practices, which result in suppliers wanting to work with you. That builds loyalty and a more resilient and sustainable supply chain with suppliers confident they’ll be paid quickly, by the agreed date, and more likely to invest in producing better goods and services.  Apply to the Fair Payment Code and get an award for your efforts to pay quick and fair.