Ever since the UK went into lockdown, the subject of payment terms between suppliers and their clients has burned brighter than ever – and not necessarily for the right reasons.
Last month, trade bodies FEA and Ceda sent a letter to the prime minister in which they called for operators receiving government support during the pandemic to be obliged to pay suppliers, and for some robust measures to be introduced to ensure suppliers aren’t unfairly left out of pocket.
To follow the argument to its crude conclusion, supply chains will fall over if they are not recompensed for work already completed – work that will have invariably involved labour, equipment provision and fees for services rendered.
Suppliers fear not getting paid at the moment. They will be used to check their bank accounts with one hand covering their eyes – looking for signs of payment in hope more than expectation.
But there is one thing that’s equally as galling for suppliers than no payment: no communication.
These are extraordinary times and I haven’t yet come across one business that doesn’t accept it is necessary to show more flexibility on finance and credit terms than at any time in the past.
Cutting a bit of slack on normal payment terms or offering customers a bit of extra time to get their houses in order could generate the kind of goodwill in a relationship that normally takes years to achieve.
Having to bank on a promise or rely on someone’s word is not ideal. But it’s a start. Suppliers can work with that.
What they can’t stomach is being completely ignored. Lack of communication breeds mistrust, creates suspicion and puts question marks over intentions.
I accept there are legitimate excuses. Staff have been furloughed left right and centre, finance teams have shrunk, emails are not being read by who they normally would. Operators burning through cash haven’t only got suppliers on their case. Landlords are piling on pressure, other bills need to be paid.
But it is the instances where there is a complete absence of communication that seems to be winding up suppliers the most. After all, there is a big difference between can’t pay and won’t pay.
I have spoken with suppliers, big and small, who have encountered this and they all insist they have long memories – they will not forget who behaved reasonably and who didn’t when this is all over.
When that customer comes asking for an urgent favour in future, or a bit of extra flexibility on the price, they won’t be quite as quick to bend over backwards. Perhaps they won’t even deal with them at all.
Suppliers know that customers might tell them things they don’t want to hear, but it’s better than getting no answer at all.
The saddest thing of all will be if relationships that were previously built on trust and confidence are damaged beyond repair just because someone couldn’t pick up a phone or reply to an email when it was most needed.