By Small Business Commissioner, Philip King
At this time of national crisis, we at the Office of the Small Business Commissioner want to ensure that small business suppliers continue to receive payments promptly. Companies can collapse as a result of decisions taken by their larger business customers, and so supply chains need to be sustained to support them and to bolster the national recovery from this crisis.
We know that large businesses sometimes delay payment to smaller partners to ease pressure on their own cash flow. However, this delay can have a devastating effect on businesses and livelihoods, even if the sum concerned is not very big by the standards of the larger company. We’ve collected evidence from small businesses that failing to receive an expected payment can have a negative effect on well-being and mental health. We are asking business leaders to consider the human impact of their actions by having individual conversations with their small business suppliers to ensure they fully understand the impact of their decisions on a human and commercial level.
Last month, I learnt that several large businesses had issued communications to their suppliers advising that payments will be delayed or stopped due to the Coronavirus pandemic. I wrote to them requesting to meet, along with Small Business Minister Paul Scully, to understand their position. One of those businesses was TJX Europe (which runs the TK Maxx and Homesense stores), with over 650 stores across six countries in Europe.
I received a response from TJX Europe President, Louise Greenlees, who was very happy to help and was able to explain that TJX extended payment terms in the short-term at the outset of the pandemic, when they closed all of their stores and this was to allow them to take stock of their financial position. The global business including Europe has a significant income which was lost overnight. Once they were able to establish the best approach to keep their business and associates safe, they wrote again to all their suppliers to let them know they would, in fact, be paid on time.
The Minister and I recently met Louise via videoconference, who went on to explain that, before writing, they had spoken individually to hundreds of suppliers to let them personally know of their plans. These must have been tough conversations to have, but it was a course of action they saw as vitally important in upholding their relationships with their valued and often longstanding suppliers. TJX have also been able to ring-fence funds to ensure that all of the annual funding commitments made to every one of their charity partners will be paid in full.
The actions of TJX during this crisis are a shining example of how the entire business community should work together to protect the supply chain. As we see with TJX, tough decisions will, of course, have to be taken in a spirit of communication and cooperation where possible. The payment you refuse to make to a small or micro business may help you to ease the pressure on your cashflow. However, for the business owner not receiving a relatively small payment it may be the difference between keeping their company afloat or not. I urge you to consider the human impact. I can imagine how devastating delayed or deferred payment might be to a small business, and I am sure you can too.
Small Business Minister Paul Scully said: “Big companies have to stand by their smaller partners and pay them on time – it’s a basic principle of good business and can mean the difference between survival and bankruptcy for small firms. We are working to tackle the culture of late payments to protect jobs and livelihoods, strengthening the Prompt Payment Code and reviewing the powers of the Small Business Commissioner.”
The Minister and I urge any small business affected by late or unfair payment practices to use our complaint investigation service and we promise to take action to tackle the worst examples of supply chain bullying.
If you would like to raise a complaint, please email: email@example.com or call 0121 695 7770.