Stressing the need to pay small business fairly and fast
I was about to close my laptop for the day, when I thought it would be worth reminding big businesses that there are other issues that must be addressed, and we can’t lose sight of them just because Net Zero is at the top of the agenda. This is International Stress Awareness Day (Wed 3 November) and is part of Stress Awareness Week.
Stress for small businesses is an ever-present condition. One of the main causes of stress is money. Money for small suppliers is cashflow and if the cash is flowing out faster than it’s flowing in, we’re talking serious stress, sleepless nights, relationship problems, unpaid bills, mortgages and rent in arrears and ultimately even homelessness, separation and divorce, and mental health problems. We need to see payments flowing quicker from big customers into the accounts of small suppliers.
Some food for thought: The European Commission found that in the UK, 30 per cent of businesses indicated that late payments had links to subsequent redundancies and outstanding invoices could pay for businesses to hire more than two million people.
The term late payments doesn’t cover the range of poor payment practices such as overdue invoices, extended payment terms, delayed and delayed payments, that force many affected businesses to focus on day-to-day activities rather than growth and expansion. The longer companies wait for payment, the lower the level of investment they make. The cashflow management system Penny Freedom says a month delay in being paid would reduce capital spend by 1.2 per cent and could lead to reduced profitability for as long as five years thereafter. It’s clear that poor payment practices are linked to an inability to access affordable finance because small firms can’t demonstrate to lenders a clear cashflow. More than half (55%) of small businesses think they’d be able to grow faster if they spent less time on the financial side of the business, such as chasing payments.
This is the backbone of our economy we’re talking about. They’re significant contributors to their communities and to the levelling up agenda, if they have the money coming in and the certainty to invest. We need to focus on improving payment practices so that they don’t have to wait 2/3/4, even 12 months after they deliver the work to get paid. They need certainty to invest, thrive and create jobs, and to sleep at night. Lack of info, support and mentoring is holding them back but poor payment practices by many big customers are holding back the UK economy. Let’s fix it now and get small firms paid within 30 days. If we can fix the climate, surely we can fix payments.
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