Enterprises often hold an annual leadership conference to review the highs, lows, and lessons from the year, and to align their leaders with the business objectives for the year ahead. The Badger first attended such a conference decades ago when all attendees were gathered in the same place for an intense couple of days of formality and informal networking with peers. Enterprises today are increasingly sensitive about the logistical costs and environmental issues associated with gathering people in one place. Many such leadership conferences have thus become more hybrid in nature with smaller, distributed gatherings connected using online video streaming services. This very modern, tech-based approach has many benefits in terms of cost and convenience.
Although the Badger’s first annual leadership conference was a long time ago, he still remembers vividly a particular point made by the company CEO during a presentation lamenting the difficulties of being an IT subcontractor delivering projects into client’s major programmes. The point was ‘Being a subcontractor is great, but being the prime contractor controlling when a subcontractor gets paid is much, much, much better!’ For some of its projects, the company had been struggling to get prime contractors to pay valid invoices for achieved milestones within contracted terms. The prime contractors had played all kinds of games to pay their subcontractors and suppliers when it suited them, rather than to what was written in their agreed contracted terms. They knew that apart from chasing and whining, subcontractors and suppliers were unlikely to take more forthright action because they wanted to avoid lasting damage to the client relationship in case it excluded them from potential future work opportunities.
Since then, UK legislation in 1998 has made provision for interest on late payment under commercial contracts. However, recent information suggests that only 1 in 10 subcontractors/suppliers enforce this right by actively charging interest, claiming compensation, or seeking debt recovery. This suggests that some level of reluctance remains due to concern about damaging customer relations, especially for smaller businesses who are, after all, the majority of the UK economy and often heavily dependent on a small number of clients. It may be decades later, but the CEO’s point noted above remains relevant.
Cash flow difficulties can cause liquidity crises and even collapse for any size of enterprise, and so when the Badger heard that the UK government is introducing tougher late payment legislation his first thought was not alleluia, but why hasn’t AI and automation revolutionised payment processing in enterprises to ensure that payments against valid invoices are always fully paid within contracted terms? After all, digital technology has been transforming everything for years, and so perhaps this new legislation will add momentum to making a payment revolution happen faster. Let’s hope so. By the way, if you’re interested, you can check how well an enterprise does in paying within terms using the government tool here.
The Information Badger 