What have payments to small firms got to do with responsible business and sustainability?
Everything, says Liz Barclay, the Small Business Commissioner for the UK, who is working hard to change the culture of poor payment practices.
I love your ORB vision:
We have a vision of thriving, vibrant cities, towns, and villages, where small businesses play a vital role in their local communities, contributing socially and economically and setting an example of ethical and responsible business behaviour in the UK and across the world.
However, that vision can’t be realised unless those small firms are treated with respect by their bigger customers and paid on time, and fairly, without having to agree to wait months for payment or forgo the contract.
In the few weeks since I took over the role of SBC at the beginning of July, I’ve met a lot of people and they all want to help my team change the culture of poor payment practices in the UK. We want responsible bigger businesses to pay their small suppliers quickly and on time.
Poor payment practices dramatically impact a small business’s cash flow leaving little room for manoeuvrability if the company has any unforeseeable issues affecting sales and productivity. So, imagine this scenario:
You may have noticed the headlines on the business pages, sites, and bulletins. Supplies aren’t getting through from producer to customers. Milk for those famous milkshakes is in short supply. The cows are still producing it in our green and pleasant fields, but at some point along the long chain from field, to processing plant to packing plant to distribution depot, to wholesaler or retailer and the famous restaurant collection point, to your local branch, there are no drivers, and the milk stops flowing.
Most of us don’t think about any of those steps until we can’t buy what we would normally buy from our usual outlet. Our local supermarket hasn’t had any semi-skimmed for a week and this morning there’s none of my usual yogurt either. We can’t just blame the supermarket chain.
Back at the farm cows don’t have on and off switches. They keep on producing and must be milked. If the milk isn’t collected the farmer has to throw it away because raw milk goes off quickly. Obviously, the farmer doesn’t get paid for milk that’s not been collected. If this goes on for a while the farmer can’t pay the bills, because the poor payment practices, he is already subjected to have meant he has little or no safety net. Eventually the business shuts down, the cows have to be sold, probably at a low price because other farmers are in the same boat, and there’s no money coming in to feed the family. And the same thing is happening all the way up the chain. Once a chain like that breaks down it’s very hard to start it up again.
All this paints a gloomy picture but it also brings the importance of the small businesses into the limelight. They are vital. They keep the country going. And after the bad times they are first back to the drawing board, starting again and rebuilding of the economy. They deserve respect and support and to be treated fairly by their bigger customers. And that means fair contracts, with fair payment terms, and processes that get the money they’re owed to them as quickly as technology allows, so that they can get on with supplying the next order, innovating, and growing, creating jobs along the way.
Non-payment, late payment or unfair payments terms create real uncertainty. Suppliers lie awake at night and ultimately there’s a threat to the existence of the business. That can impact badly on mental health and the family and home. Getting paid on time can be the difference between feeding your children over the weekend or them going hungry.
If you’ve never run a small business or been freelance it can be hard to understand how tightly cashflow has to be controlled. Imagine your boss asked you to wait 60/90/120 , or even 180 days before being paid? That delay would lead to mortgage arrears, evictions, relationship breakdown and ill health. It’s the same for the small supplier. I’m in absolute agreement with you at ORB when you say:
SMEs (small and medium-sized enterprises) are not only the powerhouse of the British economy but they also, collectively, have the power to make a real difference to our societies at local, national, and even international levels. But we need more businesses to change the way they operate: to consider people and their environmental impacts. We need to shout louder about a better way of doing business.
[Visit the #smallbusinessBIGchange blog HERE]
I am shouting very loudly about a better way of doing business. Pay fairly and on time, so your suppliers can have certainty, plan, invest in very real issues coming along like reaching Net Zero, being ethical, and contributing to their local communities.
We do indeed need to increase the responsible business movement.
Editors note: Liz Barcley, the Small Business Commissioner (SBC) and her team are passionate about supporting small businesses, stopping the culture of poor payment practices, and helping small businesses resolve any such issues. Liz is a big supporter of the #PayIn30Days campaign launched by Tony Robinson OBE in 1996.
The SBC is:
- free to use on a non-risk basis
- independent, but appointed by government.
CLICK HERE to find out more and raise a complaint if necessary.