Is the time right for this message?
The theory is that small business can afford to take more risks than large ones because they can react more nimbly when things don’t go as predicted. To take a simplistic small-scale example, if you made money selling lemonade from a garden stall in the summer months, an unseasonable cold spell might have you selling hot chocolate for a few days instead. But if you’ve made a name for yourself selling two hundred thousand branded cans of lemonade every week, there’s not much you can do to shut down factory output and reconfigure for those few days when lemonade’s not selling. You take the hit, because you’re too big to back away from the punch.
But late payment continues to be a problem for small businesses, and it means that when the punch finally reaches them, there’s no way to bounce back. Figures from August – the latest available to me at time of writing – show that about a quarter of small and medium sized businesses continue to potential financial crisis due to late payment of invoices. Fully half of all invoices are reportedly overdue, with the average SME owed more than £40,000 from unpaid invoices, nearly £21,000 of which is post-deadline.
About a quarter said late payments have put them at risk of closure, and the same proportion said that the worst offenders for late payment were large businesses, for whom the balance of power works in their favour.
This is why it strikes me as inadvisable to encourage small businesses to take risks. launching a new product, hiring a new team or opening a new office all tie up capital and don’t come with guarantees on return. Like standing within a leg’s reach of somebody’s else’s mule, it’s a gamble that won’t necessarily pay off.
While the advice itself isn’t bad, it just looks mistimed. We need to keep the pressure on larger businesses to pay promptly because while they may fit the stereotype of being slow to act on change, there’s no excuse for being slow to pay invoices. The smallest businesses don’t even have dedicated accounts teams, yet the figures show they tend to be the fastest payers. That’s not because they can dedicate all their time to keeping on top of payments, more likely that they are hoping for the same courtesy in return!
