Innovation is not all about Accelerators and Incubators; UK SMEs are owed £44.6 billion

It is a shocking stat from the Business Advice article which states that late invoice payments are costing the UK's economy billions.  

The main problem with late payments for SMEs is the genuine lack of cash flow meaning some companies have to get into debt just to pay their monthly bills (that they can’t be late for). Whilst there is a huge focus at the moment from government on encouraging more ‘Scale Ups’ in the UK, challenges like this mean it is difficult for start-ups to reinvest in the business whilst they have outstanding invoices as it is hard to future forecast or buy stock which means growth is not always realistic.

As a start-up or someone supporting start-ups it is easy to blame the big companies but how can this be resolved realistically? In my opinion a lot of the time it comes down to internal communication: often the individual in the corporate who is dealing with the supplier, will push to get the start-up paid on time because they know how crucial the revenue is. This can mean those individuals go into an internal battle of red tape often involving overseas finance teams. 

I’ve seen one company wait over 6 months for payment even though in its contract (provided by the corporate) it said 60 days. In a lot of cases start-ups don’t want to kick up too much of a fuss because they want to protect their relationship with the much larger brand. We've even been asked, by some of the start-ups we work with, to get involved and ask the difficult questions on their behalf. I think in cases like this where there is clearly a breakdown of internal communication it is important the supplier is kept in the loop. If they understand what has caused the delay and when they are likely to receive payment, they can at least plan for it.  

However, procuring start-ups / smaller suppliers has got to be made easier in the first place. I see time and time again large companies use third party suppliers as a vehicle to pay start-ups, which isn’t ideal for anyone (apart from maybe the third-party supplier). I understand as an interim measure sometimes it is the only practical way to avoid months of delays while getting a new supplier onto a system. However, as a long-term solution this should be avoided. How do these companies know they can trust the third party not to charge them a fee and then also include a fee for the start-up? Also, from a start-up’s point of view the real reason they might be doing a low cost Proof of Concept for a big brand is to get on their books so it is easier next time to do a bigger project.  

It is surprising how many proactive individuals in companies are required to pay a start-up out of their own accounts and claim it back on expenses just to progress a project quickly by avoiding the red tape. I understand organisations have to have a transparent process for paying new companies but it is important these processes don’t become so cumbersome that they are avoided altogether.

The list of 'worst payers' just highlights that companies must prepare for innovation before going to the market. This will help to protect their reputation with the start-up community in the long term. I’d challenge any organisation that assumes that they are ‘good’ at innovation and working with start-ups to identify how their procurement and payment processes are structured to compliment this work. Innovation is not all about accelerators and incubators.