Win + win = lose

It’s pretty outrageous, isn’t it? When you put your terms as 30 days, and then wait longer to be paid, you’re effectively loaning money – for free – to the company you did your work for. And now, it seems, the government is in cahoots with them.

As announced on 23 October, there’s a new supply chain finance initiative being launched by David Cameron. The scheme works like this: a large company (think FTSE 100) notifies their supplier’s bank when an invoice has been approved for payment. The bank then extends an advance to the supplier for the full amount at a low interest rate with the knowledge the account will be paid. So, the supplier gets their money quickly, the business gets to hold on to their money
and the bank gets to collect interest. From the supplier. Yes, you read that right: the big business will be getting the supplier to pay interest on their late payment.

The Prime Minister is calling this a win-win situation but, frankly, it reads like win-win-lose in a big business-bank-supplier equation. As reported in The Telegraph on 26 October, Shadow Business Minister Chuka Umunna responded to this new initiative by saying, “I think late payment by large companies to SME suppliers is a complete outrage and a national scandal. By not paying on time, large firms are forcing small companies to bankroll them – it’s indefensible and it has got to end.”

According to The Telegraph, small companies are owed £35 billion in unpaid invoices, mostly from large firms. Pretty outrageous, no?

If this subject interests you, you might like to look at the PCG site (pcg.org.uk) where they’re currently taking a poll on how much freelancers rely on and use their overdrafts.

By Liz Granirer