Late payments within organizations form part of ethical issues. Payment delays arise unexpectedly due to the ease with which customers can alter payment terms, thus making it difficult for organizations to pay employees as per the initial agreements. When this occurs, employees find it difficult to pay their monthly bills, such as water rates, electricity bills, mortgages, and train fare. For instance, large companies in the UK are not prompt in their payments to more than half of small businesses. This makes it hard for small business enterprises to pay their employees and suppliers in time throughout the year. Uninformed changes in payment terms erode business ethics in organizations, especially in small businesses as evident in the United Kingdom’s case. Apart from difficulty in accessing finance, SMEs faces challenges of getting prompt payments from their customers, which translates to inconsistency in employees’ payment dates. Legitimate explanations ought to accompany late payments to avert interpretations like abuse of power. Since small businesses have relatively low capital bases to large firms, they are always reluctant to apply legislation for fear of breaking relations with bigger businesses. Therefore, small businesses mostly become dishonest in their contracts with employees and suppliers in order to protect their relations or contracts with bigger firms.
Trustworthiness remains a key pillar in any business contract among customers, suppliers, and organizations. Organizations that incorporate honesty and fairness in their operations acquire sustainable competitive advantage over their competitors as they can attract and retain talented employees, as well as enhance customer loyalty. To develop a strong corporate culture, firms have to pay suppliers promptly in order to demonstrate strong leadership. In all their undertakings, customers ought to enhance trust among their suppliers by paying them early or in time, as this eliminates instances of suppliers’ financial risks. A delay by customers to pay a supplier is unfair and results in abuse of trust, which can terminate the business engagement. On the part of companies, they focus on employees’ actions such as corruption, frequent, absenteeism, and fraud, while forgetting to view their acts of late payments as a part of unethical practice. Moreover, failure to pass invoice for payments, offering late payments, and altering contractual agreements seem victimless crimes, yet they delay purchase and movement of inventories within an organization, thus making firms lose their timely delivery strategy. Even though organizations view such strategic decisions as having negligible impacts on their operations, the article reveals that late payments led to failure of close to 4,000 businesses during the 2008/2009 global economic recession.
To eliminate late payments, organizations should set clear strategies from their board levels to direct their accounting staff on payment modes and periods. Companies have to treat stakeholders, such as employees, suppliers, investors, customers, and the local communities, with respect in order to avoid discontinuity. For instance, if an organization delays suppliers’ payments, the relationship that exists between the company and other stakeholders worsens. For proper ethical practices within an organization, the management has to prioritize the prompt payment of suppliers among all their tasks. This ethical approach reveals respect for the supplier, and develops a stronger link between the company and its suppliers. Companies can increase loyalty and trust among their employees and suppliers by ensuring that payments are done in time. Since late payments are crimes that cause significant impacts on the operations of businesses, companies have to apply preventive mechanisms that are sustainable to contain the situations.