Late payers warned over false economy
Businesses have been warned that paying suppliers late as they hoard cash during the coronavirus (COVID-19) crisis could prove a false economy.
The long-term impact of late payments will hit not only the company’s suppliers but the payer’s own reputation and cashflow too, the Institute of Chartered Accountants in England and Wales (ICAEW) said.
The ICAEW said late payments are a matter for the boardroom, which both reflects and impacts upon the culture, mindset and reputation of a company.
It also praised the role of the Small Business Commissioner, which is an independent public body set up by the government under the Enterprise Act 2016 to tackle late payments and unfavourable payment practices in the private sector.
Iain Wright, Director for Business and Industrial Strategy at the ICAEW, said: ‘Adopting a beggar-thy-neighbour policy, keeping hold of cash which should be paid to suppliers for work done, will undoubtedly have negative repercussions. This is not only for the suppliers concerned but also for the employees they may not be able to pay as a result, leading to a chain of economic disruption and damage.
‘Such an approach is a false economy for the company, which will invariably receive a bad reputation in the marketplace. Suppliers may uplift their prices to the customer as a result of a poor reputation. Paying suppliers late may feel like a saving but will come at an additional cost.’
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