The Cashflow Trench: Auditing the Council That Pays Its Small Suppliers Late

Small suppliers are the shock absorbers of the local economy. They take on the risk of paying wages, buying materials and keeping vans on the road while a council’s finance department works through its payment run. When a council pays late, it is not merely being inefficient. It is borrowing free of charge from the firms least able to lend. At We Say Enough, we believe that a prompt-payment promise is only as good as the ledger beneath it. The audit starts with a simple question: who is waiting, and for how long?

Begin with the published number — then treat it as a claim, not a fact

Most principal councils in England publish some payment-performance data under transparency rules. You will often see a headline figure: the percentage of invoices paid within thirty days, or the amount paid late. That figure is useful as a starting point, not a conclusion. It may exclude disputed invoices, cover only certain suppliers, or measure from the date an invoice reached the payment team rather than the date it was validly submitted. Before you build a campaign, ask for the definition behind the number.

A focused Freedom of Information request should seek invoice-level records for the last two financial years: the date the invoice was received, the date it was paid, the department or service area, the contract reference, and whether the supplier is classified as a small or medium-sized enterprise. Ask separately whether statutory late-payment interest has been paid, and under what policy. If the council refuses invoice-level detail on cost grounds, narrow the request to a representative sample — the largest twenty suppliers by value, plus all suppliers paid under a named local contract — and ask for aggregate median payment times by department.

Build a supplier sample that reflects your local economy

The council’s contract register and its spend-over-£500 dataset are your map. Cross-reference them with tender documents, local chamber of commerce members and known family firms. You are not trying to audit every invoice. You are trying to construct a credible picture of who carries the council’s cashflow burden. A sample of fifteen to twenty-five local suppliers, across different services, is enough to expose a pattern.

Look for the suppliers that public bodies depend on but rarely celebrate: the joinery firm repairing council houses, the caterer supplying school meals, the IT maintenance company keeping case-management systems alive, the translator service supporting social care. These are the firms whose staff are paid weekly while the council pays quarterly in effect. Their experience is evidence.

The arithmetic of delay

Late payment has a price, and campaigners should put a number on it. Under the Late Payment of Commercial Debts (Interest) Act 1998, a supplier may be entitled to statutory interest on a late commercial debt — commonly calculated at 8 per cent above the Bank of England base rate — plus fixed compensation depending on the size of the debt. A council may dispute whether the Act applies in every case, but the calculation is a powerful way to show that delay is not cost-free.

Then add the real-world cost of cashflow. If a small firm waits an extra forty-five days on a £30,000 invoice, it may bridge that gap with an overdraft, a credit card or invoice finance. At a representative annual borrowing cost of 10 per cent, forty-five days on £30,000 is roughly £370. Multiply that across a handful of invoices and the sum becomes a payroll problem. Publish your assumptions openly. The point is not to pretend precision; it is to make visible a cost that councils routinely leave off their own balance sheet.

Identify the repeat offenders

A council-wide average can hide a great deal. Break the data down by department and by invoice type. You may find that one service area accounts for most of the delay, or that a particular payment run consistently misses the thirty-day mark. Compare the median as well as the mean: a few very large late payments can distort an average, while the median shows what the typical supplier experiences.

Ask whether the council counts an invoice as paid when the payment is authorised, when the BACS run is dispatched, or when the money reaches the supplier’s account. Ask how disputed invoices are recorded. Ask whether suppliers must use a particular portal, and whether delays in that portal are counted against the council or the firm. These are not technicalities. They are the difference between a performance figure and a work of fiction.

Turn the spreadsheet into a scrutiny dossier

Your dossier should fit on two sides of A4. Start with a one-page table: department, number of invoices sampled, median days to pay, percentage paid after thirty days, estimated statutory interest owed, and a short note on local suppliers affected. Then set out three or four case studies, anonymised if necessary, showing what delay meant in practice: a missed wages run, a cancelled order, a firm that stopped bidding for council work.

Send the dossier to the cabinet member for finance, the section 151 officer and the chair of the scrutiny committee. Ask for a written response to specific questions: What is the council’s payment policy? How does it monitor departmental performance? Has it ever paid statutory late-payment interest? What is the cost of its own borrowing compared with the cost it imposes on suppliers? Will it publish invoice-level payment data quarterly?

Make prompt payment a budget issue

A budget vote is a moment when priorities become enforceable. Ask whether the council’s medium-term financial strategy includes any assessment of late-payment risk to the local supply chain. Ask whether procurement rules reward bidders that can survive long payment terms — and whether that effectively excludes the small firms the council claims to support. Press for a small-supplier payment guarantee: a named officer, a published escalation route and a quarterly report to scrutiny.

Campaigners should also work outside the town hall. Local chambers of commerce, federations of small businesses and trade unions all have an interest in stopping public money from becoming a private credit line. A short survey of local suppliers, combined with the council’s own data, can shift the argument from anecdote to audit. The thirty-day promise is not a courtesy. It is a test of whether the council understands that its own solvency is built on the solvency of the firms it pays.