In the 9 years I have been running edgeofmyseat.com I have issued a large number of invoices but also received many invoices for freelancers and small companies working for us. Our policy is simple – we pay our contractors on or before the due date of the invoice. If we ask someone to do some work and they do it, we pay them according to the agreed terms. The odd time we have been chased for a payment due to an accounting mess up on my part, I have felt terrible about it. It’s not how we do things.
However for many companies paying as late as possible appears to be company policy. Websites such as Pay On Time have lots of excellent advice for getting paid as quickly as possible. For example sending an initial invoice, then a statement before that invoice is due, sending a reminder when it becomes due, then another when it is x days overdue, visiting the client or phoning their accounts department. All of this to receive money for work that your company has already done, to terms that were agreed beforehand. What a phenomenal waste of time! Large companies have people who spend their days dealing with this nonsense, for small companies and freelancers it is usually the business owner who spends their time chasing people who have no intention of not paying, they just want to wait as long as possible.
Some large companies have very fixed accounting procedures, which is fine if they are up front about this from the outset and we know when and how to submit invoices, and can decide if we are happy to work under those terms. However, more often the accounting system is used as an excuse once payment is already late. Also, this is 2010, if your accounting system means that everyone you pay has to wait 60 days while their invoices crawl through the system, there is something seriously wrong with that system.
If the work is being done by massive company X for massive company Y then it is likely that those doing the work have no idea that invoices don’t get paid for 60 days, however if your company has a policy of late payment, here is something to think about. If you use small companies or freelancers then the person who will be chasing up unpaid invoices will often be the same person who is doing the actual work. Next time you ring with an urgent job that needs doing – will that person be remembering their wasted hours chasing payments from you? By paying on time you demonstrate that you appreciate the work of your suppliers, and become a more valuable client, making it far more likely your work will be fit into busy schedules.
Is this just a UK issue – or is late payment culture as common in the US, Europe or other countries around the world? Or are you a business owner who can give me a reasonable argument for paying suppliers late?