A timely payday is the only way to protect our small businesses and freelancers
In 2022, we’re facing the loss of 440,000 small firms and of the talent that could drive future prosperity because of poor payment practices. Paying quickly pays everyone. It’s folly to pay late or to inflict extended payment terms on suppliers. It’s theft not to pay at all. We need to revolutionise business-to-business payments.
The problem is tangible. One of the UK’s leading representative organisations for small business surveyed 1,200 of its members. It found out 30 per cent are facing problems getting paid. By process of extrapolation, 360 member firms becomes 440,000 around the UK.
Not paying quickly pays no one. Extended payment terms are rarely the stance of an ethical business. Investors and skilled would-be recruits are beginning to ask how well small suppliers are treated. Extending payment terms and using small suppliers as a bank often signals that a firm is in financial difficulty.
In the same way that employees can’t be paid with a four months delay, small suppliers shouldn’t endure late and delayed payments. The levelling up of any area starts with the small firms, sole traders, micro businesses and freelancers operating there. Put the right support into their hands and they will level up the community. Give them no money, and they will be unable to bring any benefit.
The credit management sector is convinced it has found the solution, by providing the cash to allow firms to plug the gaps in their cashflow while they’re waiting to be paid. That does work for some businesses but rarely for the smallest. Freelancers, sole traders and micro businesses are highly unlikely to get invoice financing at fees they can afford.
Wellbeing is one of the reasons people prefer to work for themselves. The flexibility to combine work and income generation with caring responsibilities, other work whether paid or unpaid and the needs of one’s own health and wellbeing, are driving factors in the choice of freelancing or opening a small business.
Creativity, the very lifeblood of business at all levels, is another aspect of it. Creative freelancers are the bees that fertilise bigger firms with the pollen of ideas and shared best practice.
Throughout the pandemic we’ve seen more and more people give up their jobs to become freelancers or sole traders, or to set up their own business with a small number of employees. This trend is likely to continue, as the great resignation has been a long time coming. People who would in the past have made their own rules about how they worked and when, are likely to grasp that option rather than carrying on accepting the constraints of employers. The next creative freelancers may use the experience as a prelude to setting up what will become the next £3tn megacorp.
All of these are reasons why we must not let the 440,000 small firms already operating in this way go to the wall. They will take with them the talent that delivers to bigger businesses the creativity and ideas that being an employee, confined in a bigger workplace, neglects and allows to wither. If we want them to survive, we must make sure they are paid for what they deliver as they deliver it and not four months later. By then, it’s too late and the shutters are down. Where do you get your talent from when it’s gone? In the words of one supermarket chain: when it’s gone, it’s gone.