Time to call ‘time’ on late payment culture
On 6th March, Addidi launched its ‘Change the Culture of Wealth’ manifesto. Calling upon three key audiences; government, business and individuals; our aim is to encourage positive steps that will redress the imbalance of wealth we see at every level of business. Borne out Addidi CEO Anna Sofat’s years of experience in business, and driven by the continuing poor statistics around diversity and equality, particularly in the financial services industry, Addidi’s manifesto aims to tackle the root causes that have led to today’s business culture – which is simply not fit for the future.
One of the messages to the government and business community contained within the Change the Culture of Wealth manifesto is around late payment; a damaging practice that seems to have become more commonplace over recent years. Our message is clear:
Stop using SME’s to finance cashflow, pay your bills on time and reduce overdue invoice / payments by 50% within 2 years.
Cashflow is absolutely fundamental to the ability for businesses to be able to function and for SME’s to be able to invest and grow in their own development. Without the ability to invest and grow, bigger organisations will simply get bigger; being able to exert more pressure and power, and the gap between big and small will be allowed to become even more disparate.
Just seven days following our manifesto launch, on 13th March, the Chancellor delivered his Spring Statement and within this, chose to highlight the issue of late payments, declaring: “the end of late payments could finally be in sight.” Mr Hammond then went on to talk about tougher accountability measures to end the late payment crisis, although the finer details of these are yet to be announced.
The statistics surrounding the impact of late payments on small businesses paint a particularly bleak picture.
- 50,000 small businesses fold every year due to late payments.
- Almost 40 % of Small & Medium Businesses experience direct negative impacts from late payments. – Sage Report, 2017.
- 58% of FSB members are owed up to £10,000 in late payments from their clients. 15% are owed between £10,000 and £20,000, and 27% are owed over £20,000 from their late paying clients.- FSB
- Over a quarter of UK’s SMEs struggle monthly because of delayed payment from big business customers. – Aldermore, research conducted by Opinium Research, November 2018 reveals.
- The UK’s largest firms – those inside the FTSE 350 index – were found to have payment records exceeding the average, paying suppliers 16 days later than agreed terms. – Xero
We believe that everyone deserves to be paid on time for the work they do. For too long, many big corporates have been using SME’s and self-employed individuals to finance cashflow, creating an uneven balance and disrupting the fair distribution of wealth. We need to change the culture around this; ensuring that large organisations play fair – paying bills on time and rewarding loyalty. Essentially, what we are asking for is a level playing field.
So what next? We believe that change must come at a policy level, so our manifesto calls upon the government to require companies to report any payments overdue by 50 days or more. Furthermore, we believe that making it easier for SMEs to take companies to court for late payment would help to lessen the impact of the damaging culture of late payment.
Let’s not forget that SMEs are absolutely fundamental to the British economy; employing 60% of the UK private sector workforce (FSB). Let’s hope that the government sticks by its pledge to tackle this issue head on, with new legislation that will force changes in poor practices and result in this imbalance being redressed.