Relocation management companies (RMCs) complain about the very slow payment practices of some of their largest corporate clients. Meanwhile, smaller Destination Service Providers (DSPs), sitting further along the food chain, often voice similar complaints about the payment practices of RMCs.
In reality, the intensity of competition to win major relocation contracts is such that RMCs and DSPs will often feel that they cannot risk attempting to negotiate on their prospective new client's "standard payment terms" - and the problem can sometimes get worse as the contract progresses. Later on, a contract extension may only be granted on even longer payment terms (and/or lower prices).
In the UK, the late payment debt is now estimated at more than £46 billion and there is rising anger from suppliers, who are increasingly finding that 60-day payment terms have peremptorily been extended to 90 days.
One positive upshot of this trend is that tougher rules on how big companies treat suppliers are now to be introduced by the UK government. Listed businesses with more than 250 staff will be obliged to publish details of how long they take to pay suppliers, in legislation expected to be outlined within the next few weeks.
Large businesses will be forced to publish details of how quickly invoices are paid, the proportion paid late, standard and maximum payment terms and details of retrospective changes to contracts. They will be required to publish quarterly payment information and fines are being considered for companies that breach the rules.
We hope that businesses in all parts of the relocation supply chain will benefit from these new rules. The alternative, a continuing rise in cash requirements, particularly when accompanied by static fee levels, is an unattractive prospect.
In the meantime, relocation businesses should do their best to ensure that contracts contain clear payment terms, including absolute clarity over the funding of third party costs and when interest will become payable.
For advice on contract terms, please contact me on the details below.