Late payment issues increase during pandemic
Wednesday, June 30, 2021
Late payment has remained an ongoing issue for many businesses during the coronavirus pandemic – and in many cases has become an increasing one – with printers among those under pressure.
Debt purchase and collection company Intrum’s European Payment Report 2021, which surveyed 11,000 people across 29 countries, found that nearly 80% deem long payment terms and the implications of debtors paying late to be problematic – more so than did 12 months ago. At the same time, 37% said late payments are prohibiting growth, 10% higher than in 2020.
50% of UK respondents to the survey said they had accepted longer payment terms than they were comfortable with, as they did not want to damage client relationships. However, 55% said Covid-19 had motivated them to get better at managing the risk of late payments in their business.
62% of UK respondents said they would like to see an introduction of new legislation to solve the problems with late payments.
The BPIF’s Printing Outlook study runs questions on late payment on an annual basis. The latest stats, taken from its Q1 publication, found that printers continued to report that they are under pressure to accept longer payment terms from some customers.
Almost two-fifths (37%) of respondents reported that they had been obliged to accept longer payment terms from customers in 2020 in order to help retain or secure business.
Of these, 11% were for up to 60 days and 47% for up to 90 days. However, the BPIF said the real shift was in the 31% that felt obliged to accept payment terms of up to 120 days, and a further 11% in excess of 120 days.
BPIF CEO Charles Jarrold told Printweek: “The main issues have been getting payments from UK companies that have been forced to close under lockdown restrictions, but there have also been late payments from European clients.
“Even more worryingly, there have been instances of clients pressurising printers to discount and re-invoice for work that has already been done, delivered and invoiced yet not been paid for. 17% of respondents reported that they have been asked to discount in this manner.
“There were also reports of companies being coerced to rebate work already paid for. Responses to such discounting requests have varied – some respondents have bitten the bullet and chosen to at least get some money (and the promise of future work) whilst others have resisted and demanded full payment. One company commented that they brought a successful court action in order to recover payment (and costs)."
He added: “Late payments are one of the key everyday challenges for our members, the print industry as a whole and well beyond – especially for SMEs. They can lead to cashflow problems, and in turn companies can then struggle to pay their own creditors on time.
“It’s not just a straightforward financial problem either – following up outstanding payments takes time and resource which could be focused on getting new business, rather than chasing debt.”
Zoe Deadman, managing director at Launceston-based KCS Print, told Printweek her business had seen “both the best and worst of business practices” during the pandemic.
“We had one customer that started paying us early to help ensure we were not negatively impacted by the difficulties during the pandemic. We also had other customers that started aggressively pushing for longer payment terms or just finding every reason under the sun to pay late.
“We mitigated most of the negative effects of this by rationalising some of our customer base where payment was becoming harder to come by. Often the worst behaviour has been from the larger print buyers and, sadly, sometimes from printers themselves.
“We have had to be brave at times to walk away from work where the profit versus the risk doesn’t stack up. We have come out of the pandemic in a strong position, so I feel this has been the right course of action.”
Ian Carrotte, owner of credit specialist ICSM, told Printweek that from what he had seen, late payment had “not increased particularly” for printers during the pandemic. But he cautioned that when furlough ends more problems will arise “as those who have survived will take time to create an even cashflow”.
“Late payment has always been an issue for traditional printers and trade printers as there is still the ‘my word is my bond’ ethic – although less so for the younger generation and firms who only take orders online where payment is upfront,” he added.
“There was a problem at the end of March in 2020 when everything was shut down as many customers used the Covid-19 crisis as a chance to put the brakes on payment under the guise of the pandemic.
“That was a year ago, and many firms in all sectors of UK business have gone bust since then. Suppliers to print firms such as the paper guys and the press manufacturers have had a harder time from the feedback we get at ICSM.”
Commenting on how companies could best mitigate and prepare for late payments arising, Carrotte said: “Accounts departments have by and large improved credit control and that is another factor – and we constantly tell ICSM members not to trade with firms with famous names who flagrantly break credit terms.
“Take Carillion – they boasted on their website that they were as safe as houses and suppliers would be paid on 120 days. Well, we know what happened there.
“Printers should stick to their credit terms – if it is 30 days – then put a customer on stop if they fail to pay up. Dialogue is good; if a client rings and say they have a cashflow issue but offer to pay a chunk of what is owed with a timetable of when the balance is to be paid that is good. It’s when they don’t answer the phone or your emails that there’s a problem.
“I know Covid has presented problems, but people buy people – so always visit your customers whenever possible, including their accounts department, and keep things friendly and always diplomatic."
He said if there was “a wall of silence or evasion" it was time to take action using measures such as ICSM’s debt recovery department. “It’s your money so it should be in your bank account.”
The BPIF added that its members could consult its Overdue Accounts Toolkit, which Jarrold said “provides all the advice needed, clear explanations of the options, each stage and template letters too – everything a company might need when chasing a debt”.
Jarrold said the government had, in recent years, made some effort to improve payment culture, such as improving the Prompt Payment Code and introducing the role of a small business commissioner.
“But it’s not been enough, and without new primary legislation we’ll probably never achieve a really responsible payment culture. But there are some measures the government could introduce quite swiftly.
“Firstly, although the appointment of a small business commissioner has been welcome, we find that many print companies understandably don’t wish to ‘put their head above the parapet’ by taking cases to the commissioner, largely for fear of losing contracts.
“To mitigate this, we’d like to see third parties, such as trade bodies, be able to complain on behalf of small businesses – as long as both the trade body and the member remain anonymous.
“Secondly, we want to ban requirements for long payment terms to be agreed by suppliers ahead of bidding for work. Some of our members report that they are required to commit to lengthy payment terms ahead of even submitting bids for new work.
“In some cases, especially in online application processes, a box needs to be ticked stating that the supplier is willing to sign up to 60/120/150/180+ day payment terms, before the online application can proceed. As a result, business is not awarded on the basis of cost and quality, but on which firm can accept the long payment terms. This is fundamentally poor business practice and culture.”
KCS Print’s Deadman added: “I think it would be important for the government to add payment days to any of their tender processes, because that would then stamp out that bad practice, particularly among the bigger print buyers which is who we certainly find the most problematic.
She concluded: “I think that could really quickly be done and rolled out to help with that, not just in the print industry but wider afield as well.”