Banks may not be lending much money right now but I certainly am. I reckon by the end of this week I will have about £28,500 of invoices outstanding. That is my business lending money to other businesses. And interest free.
None of these invoices is even yet overdue – technically. The first will hit the 30-day credit period we small businesses have to offer our clients (custom and practice, not the law) by the middle of next week.
But one invoice was only sent out mid-January because it took a while to agree with the client the exact amount I would invoice for all the extra work done in December. Really, that invoice should have been paid by the end of the month. Some hope.
The total sums mean my business has a few hundred pounds in the current account and a few thousand in the interest-bearing account and my clients have £28,500 of my money in their accounts.
In one case I have already paid a sub-contractor £2,000 for work done, even though I have not been paid for it myself. Let me be honest here – I did not pay them until close to the 30-day deadline so I was, in effect, borrowing from them too.
Two of a kind
It should not happen. You can easily get a situation where two people doing similar work for the same company start work on a joint project at the same time. One is staff, the other freelance.
At the end of the month the staff member gets paid and the freelance sends in their invoice, to be paid a whole month after the member of staff. Both can have done the same job, working on the same project, for the same company yet be paid a whole month apart.
In the modern world, with credit cards and Paypal and soon-to-be developed mobile phone payments why do we continue this nonsense?
The government told all public bodies to pay invoices within 10 days to help firms get through the current financial crisis. The Federation of Small Business (FSB) recently said nearly a third of public services were still failing to do that. But more than a third of private sector firms were failing to pay within 30-days.
Try going in to Tesco and telling the checkout staff you will pay them in 30-days. You’d be laughed out of the store, escorted by a burly security guard.
Faster and shorter
We need a system that gets payments from and to businesses much faster, with “custom and practice” credit periods shortened.
I am not holding my breath.