It can be the bane of a small business’s life. You have provided goods or services under a contract for which you haven’t been paid. Now it is going cost you time and money to obtain what is rightly yours. And if it’s a big business that owes you the money, you risk the loss of their trade going forward.

Bigger corporations continue to bully their smaller counterparts by demanding onerous payment terms, such as 60 days or even more, and tight margins. They make matters worse by not even sticking to the terms they have agreed. There is no need for any properly-managed and adequately-funded business to take more than a month to settle its debts, but large companies do so on a regular basis and think their behaviour is perfectly acceptable. It isn’t, so what can be done about it?

Have a system for chasing money before it becomes an issue

Would specific legislation help? You can always turn to the legal system at the moment, but it’s cumbersome and expensive – it’s also not guaranteed to give you the correct outcome. Businesses should regard it as an option of last resort. Instead, you should have in place regular communications with your customers and a system for chasing money before it becomes an issue.

The government introduced a Prompt Payment Code several years ago and a number of larger companies signed up to it. But it isn’t mandatory and there is nothing enforceable about it. It’s not really worth the paper it’s written on.

Could it be beefed up into legislation that larger businesses are obliged to comply with? Of course it could, but would it really be any better than what we have now?

Over £250 billion is overdue to Small and Medium Enterprises

A recent survey by a leading insurance company suggested that over £250bn (yes, billion!) is overdue to Small and Medium Enterprises. I have no way of knowing whether that figure is strictly accurate, but it’s certainly a clear indication of the size of the problem.

What is really required is a change of culture and attitude. You wouldn’t walk into a shop and expect to take away your goods without making full payment. So why should you assume that this behaviour is acceptable where you have had goods delivered or services provided to you? We can all start to make a difference by paying for whatever we buy at the time we have contracted to pay for it. It’s just the right thing to do.