Corporate bullying

Cash flow is the single biggest issue for any business and especially for the smaller businesses. In times of economic challenges the pressure increase dramatically as banks reduce their lending levels – or eliminate them completely. What has shocked me in the last few weeks is the number of very large companies simply informing their suppliers that they have unilaterally decided to extend their payment terms.

One company I work with has received 3 letters in the last two weeks from companies, all multi billion pound corporations, which write to tell us they will be paying their suppliers 90 days from the end of the month of invoice. Add to this the time period between delivery of the product or service and you have 120 day terms. In fact, what they are probably saying is that is when they will start raising queries.

At the same time this company has suppliers, especially the large ones again, who are insisting on payment up front. Between these two pressures it will not take long for the company to run out of working capital. The company is strong, growing and well managed, but has had to take drastic measures, including reducing the pay of all staff. Costs have been cut to the bone.

As a supplier you of course have a choice – you can enforce your terms of trade, move to payment on delivery, stop supply or accept the new terms. In the world of bullying you are likely, as the weaker party and needing the trade, to accept, and work hard at getting through the problems.

25 years ago I became the European Credit Manager for a medium sized company, with responsibility for 9 countries around Europe. I was amazed that the payment terms in the UK were so much worse than in any other country I dealt with. The Germans were the best, the Scandinavians the most interesting but the UK was a constant battle, simply to get paid. I am saddened to see the payment ethos has not changed, despite lots being said on the subject.

We all appreciate that every company is facing challenges in the current economic environment, but once again the dagger goes into the hart of our enterprise system. And once again the government seems to worry about many things, but not about the simple challenges facing Enterprise Britain. And bully’s: can you spare us some change?

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