The adage that money is the lifeblood of business, is hardly notable for its profundity, but at a time when money is in short supply, its flow impeded by lackadaisical payment practices, its resonance has never been so great.

Last week saw the publication of research conducted by the Forum of Private Business (FPB), which showed that local authorities have failed to respond to government guidelines to pay suppliers within 10 days, with just 51% of invoices being paid on time in 2011/12, compared with 45% in 2009. Coupled with the fact that the private sector is a far worse culprit in paying late, it is hardly surprising that printers continue to be concerned.

These concerns are backed by data from the BPIF: its latest quarterly Outlook Survey, conducted in July, highlighted the issue as the second-largest concern of printers, with 71% saying they had seen no change and 29% saying it was getting worse.

Worryingly, it is a strain on business that shows no signs of easing, according to those PrintWeek spoke to. BPIF chief executive Kathy Woodward notes that "payment terms have also become a contract negotiating issue, with many customers looking to extend them".

While many local authorities fall short of the 10-day target, their payment timescales are relatively short. The FPB’s research showed that suppliers are now paid, on average, after 17.5 days. Worcestershire County Council was the slowest payer, taking an average of 65 days to settle.

At the opposite end of the spectrum, some councils have demonstrated impressive payment performances – Tonbridge and Malling managed to pay 97.1% of its invoices within 10 days, while South Northamptonshire came second with 96.1%.

South Northamptonshire councillor Ian McCord, who as commercial consultant at print manager Webmart knows the importance of prompt payments, notes: "With interest rates so low, there is little point in local government holding on to cash when businesses need it.

"We know how important it is for small businesses in particular to be paid promptly, as delay can cause real cashflow problems, which ultimately can see firms go under."

Cashflow culprits
But for the most part, the public sector is not the one stymieing cashflow. The FPB found that the vast majority (92.7%) of the UK’s local authorities pay suppliers within 30 days, which is a significantly better performance than many private-sector customers can boast.

As a private sector-focused print manager HH Global’s experience is a case in point. "The average for us is probably 45 to 60 days," says chief marketing officer Tony Massey.

Longer payment times are commonplace in the print industry. The BPIF’s Outlook Survey found that 72% of printers agreed to late payment terms in order to retain or secure business, while 25% of those agreed to payment terms of up to 60 days, 70% of up to 90 days and 6% of up to 120 days.

"The impact of this on cashflow will be particularly acute at the end of the year and in the first quarter of next year, when the impact of higher traditional trading patterns leading up to Christmas will put a strain on firms’ financial limits," says BPIF chief executive Kathy Woodward.

Sidney Bobb, chairman of the BAPC, agrees: "Most businesses are working on an overdraft and overdraft interest is not low," he says. "So the longer it takes before they are paid, the more charges they incur. Companies need to be able to minimise costs."

However, there is no immediate prospect of payment times becoming shorter as the issue is deeply rooted in corporate culture, according to Nigel Toplis, a former Kall Kwik boss, who last year bought the chain’s UK master franchise.

"It’s the nature of the world we live in," he says. "I think there are two issues that need addressing. One, that businesses have got to be able to collect money and so need systems; and two, that there needs to be a cultural change."

There have been toothless efforts to instil change. Such as the forthcoming enactment of the EU directive on late payments. But it merely echoes the UK’s existing Late Payment of Commercial Debts Act, which decrees that should a customer renege on payment terms, the supplier is by law allowed to charge a late fee and interest 8% above the Bank of England rate.

But many people PrintWeek spoke to said that the concept of enforcing the act on a client was anathema to the spirit of a business relationship – penalising clients is not a solid foundation for a long-term relationship.

"Good business is all about good relationships," Toplis says. "The two primary relationships have to be with the customer and supplier. Be honest with your supplier and honest with your customer. If it’s a new customer, make sure they pay you some money up front."

He bemoans the fact that late payment has been a perennial issue since the 1990s, when "companies started appointing too many accountants" to run businesses.

Today, recessionary pressures are a driver of late payments. So does that mean that when the economy recovers that we can see an end to the practice? Not necessarily, says Bobb.

 "The problem perhaps will be when we come out of recession, when slow paying will remain the norm," he says.

Late payments are so embedded into business practice, that clearly a change has to be driven from a grassroots level, Toplis argues.

"We need more education, more understanding. We need better business education. We have to move away from the idea that it’s down to government. We have to do it at the level of management school."

• The Forum of Private Business has published research showing that many councils in England are ignoring government 10-day payment guidelines with an average payment time of 17.5 days
• According to the report just 51% were paid on time in 2011/2012 compared to 45% in 2009. Councils in the North West were the quickest payers while Yorkshire fared the worst
• Tonbridge and West Malling was the best payer with 97.1% of invoices paid within 10 days, while Worcestershire County Council was the poorest taking around 65 days to settle
• The latest quarterly BPIF Outlook Survey also revealed that late payments are the second-largest concern of print companies, with 71% of respondents recording no improvement and 29% saying the issue had worsened
• Recession is seen as a driver of late payments, but many printers are reluctant to penalise clients for late payment for fear of damaging long-term relationships

READER REACTION

Adam Chetter
Managing director, Print Me It
"Chasing up invoices is very counter productive and costs time and money, when you could be focusing on other areas of the business. It can be soul destroying to have to chase people all the time for payment, especially when it’s just small sums of money. It seems to be a never-ending circle when people rely on their own clients before they make payments. We pay all our paper suppliers on time as it is important to keep a healthy relationship going and we believe if we do, they will be more amenable if we have to call in a favour."

Gary Wallace
Managing director, Wallace Print Group
"We are all very concerned about debtors. The power they have is quite frightening. We have a healthy cashflow, I’m pleased to say, but it can be a huge problem for some. The problem is it depends how tough you want to be with your clients. I have turned a lot of work down because of the history that a lot of people have. The first thing I do is to credit check them, I’m happy to pay for that. It really should be the first port of call."

Jacky Sidebottom
Director, Glossop Cartons
"It’s now common for many clients to settle late and we certainly have to chase for payment more enthusiastically than in the past. Many printers are using overdrafts and the late payment is both costing the printer interest and may financially embarrass him with his suppliers. Printers must have strict terms and conditions with the client, and not be embarrassed to discuss them and not leave it as an afterthought when the job has been long delivered. A job is only complete when it’s paid for."