Payment practices at Bupa Insurance Services have been criticised after a supplier complained to the small business commissioner (SBC) about an unpaid invoice.
The SBC described Bupa’s “poor payment practices and inadequate offer of late payment interest” after Blacklight Advisory Services complained over a £30,000 invoice.
In a report SBC Paul Uppal said Bupa was 15 days overdue on payment for consultancy services of £29,403.76. The invoice was due to be paid on the 15 January 2019, based on 45-day end-of-month payment terms.
Bupa paid the invoice after being contacted by the SBC, and said the reason for the delay was due to “errors in the invoice approval process and staffing inefficiencies”.
Bupa blamed Blacklist for not following recommended invoice submission procedures, however the supplier followed instructions provided and was told on “several occasions” that the invoice had been “received and authorised”, according to the report.
Bupa told the SBC after the contract with Blacklight began they started offering 30-day payement times to small firms. Blacklight asked for the same terms but this was refused and they were held to the original 45-day period.
The SBC recommended that Bupa increase transparency around payment options available to its small business supply chain and 30-day payment terms should be standard for small firms.
Bupa paid an interest charge on the invoice based on its non-negotiable standard terms of 2% above the Bank of England base rate, but Uppal said this was not a “considerable remedy or deterrent for late payment” and was far below the 8% set by The Late Payment of Commercial Debts (Interest) Act 1998.
Uppal said: “I am witnessing variations from the statutory defined value of late payment more frequently in contractual agreements. It seems that small businesses are being pressured into accepting these terms if they wish to supply large businesses as part of standard framework agreements.
“A substantial remedy for late payment should be substantial. It should adequately compensate the small business for impacted cash flow, and any additional resources required to chase outstanding invoices.”
The report said Bupa “responded positively” to the investigation and it “recognised that they did not meet their agreed contractual payment terms”.
Malcolm Harrison, group CEO at CIPS, said: “In these David and Goliath scenarios, too often large businesses use SMEs as a bank to prop up their own cash flow, so it’s encouraging that the government’s payment watchdog has taken this step.
“Going public and naming the organisation that fails to pay you on time is a risky strategy for the SME, but it shows the level of frustration many small businesses experience every day. SMEs need the weight of government to force the issue. Professional supplier management practice must also be to ensure that all suppliers are fully aware of corporate payment procedures and suppliers, especially SMEs, should be supported so that they are able to conform to those processes.
“The government’s announcement that it will stop awarding contracts to businesses which don’t pay their own suppliers quickly will demonstrate a sea change in the sourcing culture and the issue of prompt payments. It is essential that the government rigorously enforces these new rules to encourage this.
“Late payment affects all of us. It can drive SMEs, the lifeblood of the UK economy, out of business. As a result, valuable staff are left unpaid, critical investments are delayed, and businesses are unable to function efficiently. We must address this urgently if we are to help commerce thrive.”
☛ Want to stay up to date with the news? Sign up to our daily bulletin.