EOW Reflections: Tough Times

£72,000. It’s a big figure for a small business and when it’s been outstanding for months the stress is enormous. If you’re running a big business, you may not lose sleep over £72,000. For a small, micro or even a medium business however it’s significant. There are all sorts of things you can’t do when you’re waiting for money to come in and it’s overdue.

You have a gap in your cashflow. With the best will in the world a micro business and most small firms simply won’t have that in reserve that they can dip into to bridge the gap. I’m constantly told there are solutions such as invoice financing that are there to help with the problem. For many small and micro businesses that’s not possible. They can’t get invoice financing or any other kind of funding to bridge the gap and have already used up their overdraft and credit card limits, plus borrowed from friends and family who are cash strapped themselves before they come to us. While the bigger customer holds onto £72,000 of free finance the small supplier can’t pay their own bills, wages, or suppliers and can’t pay themselves a wage, so the household struggles with the business.

There is a long list of other things that a smaller supplier can’t do while the bigger customer holds onto their money: invest in skills, retraining, people, buy new to replace out of date machinery or equipment, think about plans to reduce carbon emissions, plan for the future, innovate and create jobs.

On the home front, bearing in mind that for small businesses the income from the business is often the only income coming into the home, the bills including the rent or mortgage don’t get paid. The person who contacted us who is owed £72,000 is in the process of having their home repossessed and they’re not alone. Another business owner told me he and his wife who also works in the business had eaten the last of the dried pasta at the back of the cupboard. It wasn’t a joke. A letter from the bank threatening repossession of their home followed on Wednesday.

Our agile, creative, innovative small businesses are being pushed to the brink by bigger customers holding onto their money. I don’t think this is deliberate in most cases. Most people don’t get out of bed in the morning to do a bad job. However, they work in silos. If I work in procurement, I want the best supplier at the best price for the company I work for. I negotiate and tell that supplier they will be paid in 30 days. However, if I’m working in a silo, I don’t know what happens next. I move on to procuring the next supplier. I leave the payments up to people responsible for paying invoices. I don’t know how they work. I probably don’t know there’s an approvals process that every invoice goes through before it reaches Accounts Payable. I possibly have no idea that in reality the small suppliers whose goods or services I procured on the promise that they’d be paid in 30 days will get paid in 45 or 60 days or even longer.

We must do better. Our small businesses are losing sleep because they’re not getting money into their accounts when they expect it and can’t manage their cashflow. Times are additionally tough as firms face increased wage and National Insurance bills and wonder if tariffs will affect them. Many are having to increase prices to customers who themselves are strapped for cash.

The OSBC Casework team is here to help, for free. They will do everything possible to make sure your working relationship with you late or non-paying customer doesn’t break down if it hasn’t already. We know one of your biggest fears is losing future work.

Together businesses big and small can get through this tough patch to the benefit of all but we all need to understand each other’s processes better and communicate better so we don’t get caught out waiting months for money we need today.

PS: The £72,000 has been paid.