Paying on time is not only pragmatic – it’s right

Business people often think that  if something can be done (if the law allows it) then issues of right or wrong don’t arise. If it can be done then it may be done.

‘It’s just business…nothing personal,’ people often say, whilst doing something appalling.

But business IS personal and we should never forget it. I’ve never understood why the moral principles that guide our personal and social lives should be suspended when it comes to business agreements. Business is a social activity, conducted by human beings. Why should we think that because business is supported by law and contracts, it is only a contractual relationship, without additional moral implications?

‘It’s perfectly legal’, people said, in former Eastern Europe, as they betrayed their business partners by diluting their share capital when the law was too weak to prevent it. Yes, perhaps it was legal, but it was wrong.

Business isn’t just about profit and loss. It’s also about behaving ethically, and that means avoiding unjustified discomfort for customers, employees, cleaners, tax-drivers, suppliers, indeed anyone your business puts you in touch with. Paying your suppliers on time, if you can, is a moral duty, as well as a contractual one.

payments

I’m told that some companies reward their accounts payable departments for holding off their creditors, just as they reward their accounts receivable departments for reducing debtor days. The former is just plain wrong.

My policy is to pay suppliers according to the terms of our contract, as long as there is no dispute about the goods or services supplied, and as long as there is sufficient cash in the bank. And if we don’t have sufficient cash, we borrow in order to meet our contractual terms.

It’s also pragmatic to pay on time. An adversarial relationship with suppliers results in poorer goods and services.

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