The UK’s Intelligent Transport Society, ITS (UK), is issuing a call for all major companies to honour the payment terms with their SME suppliers.
The plea follows comments from a number of ITS (UK)’s smaller members who have described how they have had to wait more than four times the agreed 30 days to receive payments totalling many thousands of pounds. This delay in payment is putting a huge amount of strain on cashflow, which ITS (UK) says at best blocks innovative SMEs from participating in projects with long supply chains and at worst puts businesses at risk of bankruptcy.
The Highways England Fair Payment Charter commits to the organisation paying invoices within 30 days or receipt, and HE expects its contractors to do the same. However, it has emerged some contractors are adding in a number of extra steps which delay payment, including an “Application for Payment” which can take several weeks to process before a “Payment Certificate” is issued. Only then can an SME send an invoice and after that it may face the contractor’s payment terms of up to 60 days.
“As an SME cash flow is extremely important, and the old saying ‘cash is king’ is never more important than it is in these testing trading times,” explained one ITS (UK) member.
“Why is it that some – and I emphasise the some – of the larger Tier 1 suppliers feel they can use the cash from SMEs like mine as an interest free loan? Despite being signatories to Highways England’s Fair Payment Charter they withhold payment from subcontractors for months at a time on purely administrative grounds. That not only affects the cash flow of the SME concerned but also costs the company valuable time and effort chasing the outstanding debt.
“Most of the Tier 1s have an additional ‘applications for payment’ process which in itself is in breach of the spirit of the Fair Payments Charter – pay and be paid within 30 days. However, we can accept that process since most of the Tier 1 providers do follow their own process time scales, but what if those who don’t?
“Who polices their policy? What can be done to ensure that Tier 1’s are following what they signed up to?”
ITS (UK) Secretary General Jennie Martins says the organisation is championing the rights of SMEs in order to ensure they get paid in a fair and timely manner. “Smaller companies should not be seen as some sort of bank to help manage the cash flow of bigger ones,” she said. “Not only is it morally wrong, it is short-sited by the bigger businesses. At best it stifles the innovation contributed by small businesses, and at worst it bankrupts them.”
ITS (UK) is asking for other members experiencing difficulty with payment to come forward. It stresses all information will be confidential, and the identities of the SMEs and any companies complained about will not be released.
(Picture – Yay Images)