Small Talk: Tackling late payers is a question of culture, not law

Which industry is worse than any other at paying its suppliers on time? The answer will not come as a surprise to readers who have followed recent efforts of companies such as Selfridges and John Lewis to squeeze more margin out of their supply chains. Retailers, it turns out, are the only companies who are paying more tardily today than a year ago.

Not that other types of company exactly cover themselves in glory. Dun & Bradstreet, the business analyst, says the average firm typically paid its bills 15 days late last year. Just to reiterate – that's not paying your bills within 15 days, but 15 days after you agreed to pay them.

For retailers, says Dun & Bradstreet, the average is 19 days late, which is two days worse than a year ago. By contrast, payment times across the economy as a whole are two days lower than last year's figure of 17 days.

To be clear, these figures cover businesses of all sizes – not specifically large companies paying small and medium enterprise (SME) suppliers late. But the problem starts with the large companies and cascades down – starved of cash by their larger customers, SMEs then have little choice but to pay their own bills late too.

The research includes statistics for average late payment times in continental Europe. The UK is broadly on a par with France, Spain and Italy, but is nine days behind Germany.

The fact that Germany has done so much better on late payments over the past 12 months can't be explained by its relative economic performance because its GDP figures have been pretty to similar to those registered by the UK. In other words, German companies have been under no less pressure to protect cashflows and profit margins than their British counterparts. However, Germany is much less accepting of late payments, to the benefit of everyone in the supply chain.

Will the European Union's new Payments Directive flatten out these late payment discrepancies between countries? It is designed to make it easier for businesses to pursue payments from customers and to force late payers – defined as those failing to pay within 60 days in the private sector – to pay interest charges and costs.

Unfortunately, the problems with the directive are numerous. Not least, the 60 days rule includes a get-out clause, allowing companies to pay their suppliers over any term they like where agreed – and larger businesses, in particular, find it very easy to persuade SMEs to agree. Also, the right of businesses paid late by their customers to claim interest and other costs is already enshrined in UK law, but has had little effect.

Above all, the directive requires those paid late to file a legal claim in order to enforce their rights. Such cases are rare because businesses are understandably reluctant to jeopardise their relationships with clients, even if they're unhappy about payment delays. That's doubly the case for SMEs dealing with large businesses – there is simply too much at stake to risk legal action.

What's really needed is a cultural change so that we get a shift to a more German business model on payments. That will take some time, though the naming and shaming of bully-boy large companies – such as those behaving so badly in the retail sector – will help, and the more SMEs that stick their heads above the parapet the better.

Government initiatives can help too – more insistence on businesses joining the Prompt Payments Code, for example, limited though the protection it offers is. Finding a way to help SMEs get redress from late payers without expecting them to confront large companies would also be transformational.

Sports Stars Media eyes special TV deals

Like its hottest property, Sports Stars Media is hoping new opportunities may be just around the corner. The company has the rights to use images of Jose Mourinho – the Real Madrid manager being linked to other leading jobs in Europe – in a cartoon TV series, Mourinho and the Special Ones, that will also be used to promote its Mourinho Trading Card Game.

Now that it has finished making the series, it is in talks with broadcasters about where it might be shown. In the meantime, the company will today announce a deal with Coerver Coaching, a football skills academy operator that has a presence in 28 countries and links to clubs such as likely Champions League finalists Bayern Munich. Coerver will provide skills know-how for use in the cartoon series and the trading card game, as well as the Multi Skills Cup, an online competition Sports Stars Media is running, for which it has signed up Real Madrid star Cristiano Ronaldo as a front man.

Shares in Sports Stars Media have barely moved since the company floated on the alternative investment market last year and stand at 0.83p.

But the business does have a second strand, its Gombby's Green Island cartoon series, for which it has a broadcast contract with Al Jazeera Children's Channel.

Rare plaudits for star performers

Smaller companies rarely win the plaudits they deserve, so the new Small Cap Awards, an initiative whose supporters include the London Stock Exchange, is a welcome addition to the corporate calendar. The inaugural event, held last week, featured several companies that will be familiar to Small Talk readers.

Belvoir Lettings picked up the IPO of the Year Award, following its stellar performance since flotation on the Alternative Investment Market (Aim) in February 2012 (when Small Talk first featured the company). Shares in the nationwide lettings business, which operates on a franchise basis, were trading at 142.5p on Friday, up from the 75p issue price.

Leeds-based Tracsis was also a winner, picking up the gong for Small Cap Company of the year. The transport industry technology specialist had a double reason to celebrate, having just declared its £3.28m deal for data collection business Sky High go unconditional. Aim-listed Tracsis shares were trading at 185.5p on Friday.

Small Business Man of the Week: Mark Findlay, co-founder, Harvey Maria

Harvey Maria makes vinyl flooring that is much more design-conscious than the products you normally see. We set up the business in 1995 after trying out our ideas on friends and family with colour photocopies stuck to our kitchen floor. I was a commercial surveyor but I'd just done a business course and I'd met a jewellery designer who was working on floor designs. We worked together to commercialise her ideas. We did that for eight years and then switched from producing on cork to vinyl. A new partner came in, and things started to take off.

"We regard ourselves as a design company, which happens to have chosen flooring as our medium. The greatest proportion of our sales come from the UK still, but we're also now exporting to more and more countries.

"The other significant development for us is that we've started doing licensing deals, which are proving really popular – the first one was with Cath Kidston.

"Much of our success is built on the business software we run, which has transformed the way we run the company.

"Netsuite is a cloud-based technology that has allowed us to build a sales model.

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