It is an increasing problem and it shows no sign of abating.  Larger companies flexing their muscles and not paying their invoices as per the terms of the contract causes a ripple effect that can ultimately cause businesses three or four steps down the supply chain to have to close down.

When a project is agreed, and a supplier is brought on board to complete that project, that supplier may need to sub-contract some of that work out, and that sub-contractor may in turn have to do the same thing, and so it goes on.  Ultimately the money for that job has to come from the very top, and when it isn’t forthcoming in the timely and agreed manner the supplier is hassled for payment by the sub-contractor, who is hassled by their sub-contractor and so on and so forth.  It becomes one long paper chasing chain of businesses that should all be investing time in finding new work and not chasing bad debts.

It may be that a sub-contrator in the chain was waiting on this payment to keep their business alive – and when it doesn’t come, what can they do?  Threaten to sue whoever employed them to do the work is one option, but that is potentially costly and time consuming and by the time it is all resolved it could be too late.  What if the supplier that employed the sub-contractor could not afford to pay if they are sued, and therefore have to sue the business that employed them…well that’s two businesses that effectively go to the wall, while the larger business earns interest off the money they haven’t yet paid out.

In these situations there ought to be a government agency tasked with simply getting all invoices paid to all parties – it’d certainly help the economy, and it’d stop thousands of small businesses having to claim insolvency each year at great cost to the taxpayer.  How difficult would it be, if at the point an invoice were late, the government agency would be contacted. Who, apon checking there was a valid purchase order in place and the work had been completed as stated, would transfer any outstanding balance immediately and then pursue the offending business through the proper legal channels at their disposal, with the threat of immediate closure or fine among their arsenal, as well as public notification of the fact they are now being pursued for this money.  It could be guaranteed that any business who valued it’s brand wouldn’t allow this sort of bad PR opportunity to arise, and would pay at the first time of asking.  Therefore the only people out of pocket would be the business who commissioned the work in the first place, as it should be, and not the small businesses that keep the economy afloat, and certainly not the taxpayer.

Matt Ormrod

singleredfish