Paying On Time – universities are failing

Universities are not living up to Government prompt payment targets.  As many suppliers will be local SMEs this threatens the cashflow of businesses that may be teetering on the edge, and the well being of local economies.

I’ve twice in the last couple of months been hit by university finance systems that have a monthly payment run so that if a claim or invoice is not submitted by a certain date, often the first day or two of the month, then it is not paid until the end of the following month, leading to a seven week delay in payment.  This is despite Government guidelines for a normal 30 day payment period and to aim for 80% payment within 5 working days.

I’d like to say these are rare cases, but are sadly typical of university payment and expense systems.  In some cases this is because one is being treated as a casual employee, so falling into payroll systems.  However, often the same systems are clearly being used for commercial payments.  This means that if a supplier misses a monthly deadline they may wait nearly two months for payment … and of course if they are VAT registered may have already had to pay the VAT portion to HMRC before they actual receive the payment.

The idea of monthly cheque runs is a relic of the 1970s when large reels of magnetic tapes had to be mounted on refrigerator-sized machines and special paper had to be loaded into line-printers for cheque runs.  In the 21st century when the vast proportion of payments are electronic, it is an embarrassing and unethical anachronism.

As well as these cliff-edge deadline issues, I’ve seen university finance systems who bounce payments to external suppliers if data is on an out of date form, even if the form was provided in error by a member of university staff.

Even worse are universities finance systems which are organised so that when there is a problem in payment, for example, a temporary glitch in electronic bank payments, instead of retrying the payment, or informing the payee or relevant university contact, the system simply ignores it leaving it in limbo.  I’ve encountered missing payments of this kind up to a year after the original payment date.  If one were cynical one might imagine that they simply hope the supplier will never notice.

The issue of late payments became a major issue a few years ago.  Following the recession, many SMEs were constantly teetering on the edge of bankruptcy, yet larger firms were lax in paying promptly knowing that they were in a position of power (e.g. see “Getting paid on time” issued by the Department for Business, Innovation & Skills, February 2012).

Five years on this is still a problem.  In April last year The Independent estimated that British SMEs were owed 44.6 billion in late or overdue payments(see “The scourge of late payment“).  There is now mandatory reporting of payment processes for larger companies, and recent returns showed that some companies missed prompt payment up to 96% of the time, with bad performers including major names such as Deloitte (see “Ten of the UK’s big businesses that fail to pay suppliers on time get named and shamed by the Government“).

There is also a voluntary “Prompt Payment Code“, but, amongst the signatories, there are only two universities (Huddersfield and Westminster) and three colleges.

Universities are often proud of the way they support local economies and communities: being major employers and often offering advice to local businesses.  However, in respect to prompt payment they are failing those same communities.

So, well done Huddersfield and Westminster, and for the rest of the university system – up your game.

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