In the same week we learned that large businesses are using small firms and contractors as their corporate piggy-banks, by withholding payments totalling an eye-watering £26 billion, the Court of Appeal has firmly stood up to the vile and pathetic tactics used by companies to hang onto other people’s money.
Thank you Lord Justice Jacob for making a stand for the little guy (and gal). And for injecting much-needed common sense into the whole debate surrounding late payment.
Embarrassingly for the government – which is not only heavily pushing the Prompt Payment Code, but also insisting that the public sector should settle its bills within ten days – the ruling has been made against one of the largest government departments, Defra.
So, what exactly does all this mean for contractors? Well, agents and clients can no longer give us a load of flannel about holding up all our payments because of an error in one invoice.
You know the sort of thing: “you got the client reference wrong” or “you made a small error in the calculations, even though the total was correct”, or “you missed a digit in the purchase order number”, or “the address needs to state exactly which department you are working for”. The list is endless.
But Lord Justice Jacob has effectively said what we all know: that this is absolute... well, he’s a judge, so he’d probably say, “twaddle” – contractors have another word for it.
His ruling means that the real questions clients and agents need to be asking are things like: “Did you perform the services outlined in the contract on time and to the agreed standard? Did your client contact sign off your timesheet for that period?”
If the answers to questions like these are “yes”, then, says the judge, the contractor must be paid. What matters is whether the contractor has fulfilled their side of the contract – if they have, the client or agency must pay, and pay on time.
If they don’t, you’re entitled by law to start charging them interest at the Bank of England reference rate plus 8%. Even with today’s low interest rates, that extra 8% should be more than enough to encourage late payers to give contractors the money we’re owed.
If they still don’t pay, claiming there is some technical reason, such as a minor error on your invoice, refer them to Lord Justice Jacob’s ruling, and use the late payment calculator on this site to show them just how much extra they must legally pay if they delay payment further.
And remember, not only are you protecting your own interests by doing so, but you’re also protecting the client’s interests. After all, the operational teams who rely on contractors to keep their businesses going don’t want to see those very contractors walking because the finance department has been instructed to hang onto as much of their suppliers’ money as possible, for as long as possible.
So find the time this week to raise a glass to Lord Justice Jacob and his common-sense ruling. And take a firm hand with your clients or agents who decide they would prefer your money to be in their bank accounts.