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Real Life Lessons

How To Tackle Late Payers

By April 28, 2014 No Comments
How To Tackle Late Payers

Q Medical Technologies logo

Q Medical Technologies Group

Andrew Kemp has grown Q Medical Technologies Group from a newly-formed four-man band nine years ago to a thriving enterprise today with a workforce of 25 people in the UK, and many hundreds more operating worldwide in countries from China to India. The infection control business, which has its headquarters in Nottingham and warehousing in Kendal in Cumbria, is now experiencing stunning growth, but Andrew admits that late payment caused significant problems in its earlier days, and even affected the company’s ability to expand.

“We were once in the position where I, as the chief executive, and my managing director decided not to pay ourselves for a couple of months because the business was waiting for uncontested invoices to be settled,” Andrew explains. “It’s a massive problem for small firms, and can determine whether they decide to take on more staff. No one wants to employ people when there’s a fear that you won’t receive the money you’re owed, and obviously you need that cashflow to cover your payroll.”

Small and medium firms in the UK are owed about £55 billion in unpaid invoices, according to the most recent research from Sage Pay, a figure that has increased significantly during the recent economic downturn as larger firms use their smaller peers as an effective line of credit. Commenting on the staggering amount that SMEs are owed, Andrew says:

“Just think what it would do for the British economy if all of those billions of pounds were paid to SMEs overnight. They could expand and export. The boost to business would be enormous.”

Andrew recognises that his company is in a better position than many smaller firms since it operates in a specialist niche, developing clinical products for use by doctors, hospitals and officials to minimise the likelihood of infection. Because Q Medical Technologies’ work is unique in many of these areas, Andrew believes that he’s been able to punch above the company’s weight when dealing with even its largest customers.

He comments:

“On a simple level, I think that SMEs have to stick to their guns. By that, I mean that business owners need to stand their ground and demand the money that they’re owed. A lot of people are quite scared of big companies, worried that if they complain about an invoice not being settled then they might lose business in the longer term. But not getting paid carries greater risks than losing a customer.”

In one instance, Andrew’s business was waiting on payment of a bill that was almost a hundred days overdue and that exceeded a hundred thousand pounds in total. In that case, Andrew consulted the company’s lawyer, and sent a letter to the offending organisation’s chief executive demanding immediate payment, or risk being sued for non-payment – both as an individual and as a company.

“It takes an awful lot to do something like that, and it’s not an approach that I enjoyed at all,” he adds. “But the sum owed was paid very soon afterwards, and it sent the message that we’re not prepared to be treated like that.”

Andrew feels so strongly about the late payment issue that he thinks it must be tackled at a parliamentary level, as well as by each business owner individually. As a result, he’s become involved in a parliamentary working group tasked with developing some real solutions to the problem. Through discussions with politicians, civil servants, and other business people, the group has come up with a potential way to tackle late payers through written standards, rather than legislation.

“I don’t think further legislation is the answer, and I don’t think other business owners want that either,” he explains. “But I think that there’s an opportunity to amend the ISO standards of the British Standards Institution (BSI) to include a paragraph saying that in order to retain ISO recognition an organisation has to achieve a payment standard. This would ensure that good practice in terms of payment starts to work its way right down the logistics chain.”

The planned measure would mean that only companies that adhere to the ISO/BSI standards would be allowed to tender for Government contracts. Once the revised version of the standards has been drafted, the suggested changes will be taken to parliament for approval.

“Many politicians have taken on the issue of late payment and failed,” Andrew concludes. “But I feel encouraged that this working group is cross-party, and has backing from all sides. The reality is that something has to be done to help SMEs in this area. It’s simply not justified to allow them to go without the money they’re owed any longer.”

See one of Boost Capital’s previous blogs for more tips on avoiding late payment.

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