Pay Day

An artist is not paid for his labor but for his vision.

It’s pay day for many salaried employees, so today seems an opportune moment to bring up a topic that has been buzzing round my head for a few weeks.

A freelance journalist I know, quite a high profile one, was bemoaning the state of his finances the other day. Not the fact that the supermarket shopping bill has rocketed, nor that his heating bill – he works from home (though the fact he has teenagers is probably more pertinent here) – is bankrupting him. It’s not even that the price of his Friday night pint and G&T in the local round the corner is now well over a tenner.

All these would be irritating but manageable if people would only pay him what they owe him. He’s not alone. Every single self-employed pal of mine, every single small business owner – and quite a few of the larger ones – that I know, is struggling more than ever with getting people to pay their blooming invoices on time.

This isn’t a new problem, far from it. There are businesses out there that work on the principle that any money is better in their own bank account than in someone else’s, regardless of the fact that that other company might be owed that money. If you take it down to basics, you can look at it this way: if you do work for someone (which in this instance would include buying something from you on account) and then doesn’t pay for it, they are keeping hold of money which is yours. In effect, stealing from you.

I know, from conversations I’ve had with merchants, that this isn’t just something that sole traders suffer from. Merchants have long been heralded as the ‘industry bankers’. They buy stuff from manufacturers, store it in warehouse or yard space that they have had to pay for somehow, then eventually sell it to someone, often delivering it in lorries or trucks that they have paid for, and then wait to get paid for it. Sometimes there can be a very long gap between a merchant paying for the goods, and them getting paid for them in turn.  Sometimes it’s the other way round and the goods have been turned round and sent out the door way before the invoice form the supplier comes due. This is one of the reasons we include a Stock Turn analysis in our annual Trailblazers supplement.

I’ve had quite a few press releases lately touching on this issue, usually from a company that has some sort of service to sell to help with payment difficulties, but the fact that there are so many means it’s clearly becoming more of a problem

The knock-on effects of not getting paid on time are clear. Chasing up for monies owed is time-consuming, it affects cash-flow and the ability to continue running the business in the most effective and efficient way possible: the clue’s in the word ‘flow’ by the way. Money comes in, money goes out, money goes in money goes out. And the business continues.

One piece of research apparently found that only 1% of small businesses have never had to deal with an overdue invoice, and that, on average, businesses in the UK businesses in the UK are spending an average of eight days chasing unpaid invoices. That’s eight days that could be spent doing other work: buying, selling, making the company run more effectively etc.

There are companies out there who operate on this ‘pay only when the threat gets legal’ as a business model. I guess most merchants will have had some on their books at one time or another. I guess that is one of the benefits of the collaborative nature of this industry – the act that people talk to each other and  can, officially or unofficially highlight to rogues.

If we believe the headlines, this year is going to be hard enough as it is, without having to worry about getting the bills paid in a timely fashion.

via GIPHY