Ensuring businesses continue to be paid promptly
At this time of national crisis many small businesses are worried about what the next few months will bring, including whether their invoices will be paid on time, if at all, writes Philip King Small Business Commissioner.
Making payment promptly through the supply chain during the current climate is vital for the immediate survival and future of small businesses.
I recently published an open letter to all businesses, asking them to think seriously about the impact of their payment practice for their supply chain. I also wrote to a number of businesses thanking them for showing leadership and taking measures to support their smallest suppliers, including ensuring they are paid as quickly as possible. The impact on small businesses receiving payment faster than they might have expected cannot be overstated but the consequences of late payment can go far beyond financial to affecting well-being, mental health, and more.
On the other hand, I have been dismayed to see some businesses taking the opposite stance and delaying payment on a blanket basis. I am writing to the Chief Executives of these businesses urging them to consider the impact of their actions and to review their decisions. Businesses are facing extraordinary pressure on cashflow and I understand the need to make commercial decisions in mitigation, but taking this position will inevitably cause damage to suppliers and the economy. Furthermore, the human impact of these actions is detrimental. For the small business owner, not receiving a relatively small payment can be the difference between putting food on the table or not. Tough decisions will, of course, have to be taken but they should be in a spirit of communication and cooperation.
I have had positive conversations with the Chief Executives of several large businesses and as a result, they have prioritised payments to their smallest suppliers in full, or at least in part. I understand that we can't just assume large businesses will have no cashflow management issues. Some may not physically have the cash to pay all their suppliers but there must be a balanced approach and Covid-19 cannot be used as an excuse to simply suspend or delay payment.
I am working closely with the BEIS Secretary of State, Alok Sharma, and Small Business Minister, Paul Scully, and we are committed to ensuring businesses are behaving responsibly in the current climate. A joint letter from the Minister and I to the 100 Group Chair was well received and has been shared with all their members. In these unprecedented times it is more important than ever that government works to support the business community as a whole, and the 100 Group has offered to continue to support us as the situation evolves.
Cash flow is more important than ever and the purpose of my letters to businesses is to drive a move away from transactional thinking, to humanise business relationships, and to take account of emotional impacts. This is a time for collaboration rather than confrontation. It is imperative that businesses work together as partners and create a culture of good payment practice. Looking at their supply chain to identify the most vulnerable and ensure they are supported will mean those suppliers are still there to support them when the crisis is over. This will reduce damage to the economy and will eliminate the risk of reputational damage.
My Office has a 100% success rate in collecting payment for in-scope complaints and has collected over £7m to date. I urge all small businesses that have outstanding invoices to get in touch with us. We provide a free service and can help through this difficult time.