As small businesses and workers look to national and local government for support in the face of the rapid business slowdown caused by coronavirus, across the UK, increasing numbers of local authorities are operating progressive payment practices to accelerate cash to their suppliers. This model is applicable to large companies, as they look to manage their way through the current crisis.
Getting cash to suppliers fast makes a critical difference. Councils across the UK are taking measures to ensure their micro and small suppliers are paid as soon as invoices are approved, rather than being held to term. Oxygen Finance is supporting approaching 50 clients, ensuring they can receive and process invoices quickly: on average Oxygen’s clients paid participating suppliers in 10 days.
Philip King, Small Business Commissioner added: “Cash flow is vital and can be the difference between survival and failure, particularly for small businesses. Paying early makes a real difference to the supply chain and makes it sustainable. The buyer wins, the supplier wins, and the economy wins.”
There are billions of pounds owed and tens of thousands of businesses liquidated each year through late payment issues. Behind each of those statistics are individuals, with a family, a home and a livelihood. Losing your business can be devastating.
Warwickshire County Council has been operating ‘FreePay’ for a number of years, ensuring smaller local suppliers are paid immediately once invoices are approved. Rob Powell, Strategic Director for Resources at Warwickshire County Council commented: “In these uncertain times, the programme we have put in place with Oxygen Finance, puts us in a great position to support local business. As a Council, we want to be a good partner. Now, more than ever, prompt payment and cash flow are crucial to support our supply chain.”
Ram Mahendran, Bromson Hill Nursing Home: “Since joining the Premier Supplier Scheme in November 2018 we have been able to rely on predictable early payments from the Council, being paid within two days. Being part of the service has enabled us to concentrate on growth, spending time on attracting new residents and staff rather than chasing payments. One of the additional benefits is that it has strengthened our relationship with the council, while providing essential public services.”
Dennis Cook, Bentley Cook Ltd, Graphic Design: “Cash flow is key – especially for a business that depends on monthly bills to pay software, accountancy etc. FreePay means we get paid faster by Warwickshire, so in turn our suppliers get paid on time and we can plan ahead. Faster payment, fewer issues for everyone.”
CIPFA Associate Director Andrew Burns said: “For small business, maintaining liquidity can be a challenge at the best of times, let alone during a public health crisis where additional costs can easily mount up. Small businesses make up a hugely important part of the public sector supply chain, and it is vitally important that they are enabled to remain afloat. We must all work together across sectors at this difficult time, therefore CIPFA would urge all public sector bodies to be timely with their payments to their suppliers.”