Author: Natalie Orringe, NED Good Business Pays; Founder, Strategy & Impact
The tax self-assessment deadline is a date remembered by every small business owner. Whether you’re a person that submits their tax return six months ahead or one week after the due date, the financial penalty prompts action. Businesses operating in one of the toughest economic environments of recent times don’t need yet another cost.
The reaction to late submission of a tax return contrasts to how many respond to almost year round late payment of invoices. As a non-executive director for Good Business Pays, and as a sole trader with my own communciations consultancy, I’ve had countless conversations about why the culture of late payment continues. Research published last Autumn from Good Business Pays found a 10% year on year increase in companies where average payment terms were over 80 days.
This means companies were making payments nearly three months after the service they bought had been provided. This at a time when nearly all of us ‘tap and go’, paying immediately for services such as food or travel. It seems we’re comfortable that there is an almost universal two-tier approach to payments between our behaviour as consumers and our behaviour as responsible businesses paying suppliers.
The impact of late payment at a macro level on our economy and at a personal level on business owners is profound. It slows economic growth, stops job creation and, worse all, causes intense stress that can lead to depression.
But it doesn’t need to happen. Let’s learn from HMRC’s approach to tax payment and call for greater penalties for businesses that break agreed payment terms. And, along with this stick, let’s encourage contractors to refer the Good Business Pays watch list before beginning work with any company. The threat that businesses might not be able to buy the service they want from the contractor they want because of their poor payment behaviour might make the difference.
Payment on time is not simply good business—it’s also a key way of proving your values as a business. We all have a part to play in establishing a culture of prompt payment that secures UK PLC now and into the future.