Why Prompt Payment is a Crucial Part of Responsible Business
Businesses that have a purpose beyond profit have benefits for their employees, customers, suppliers, wider community and the planet. When we talk about responsible business, we often shy away from conversations about money. However, the provision of services or goods without prompt payment will not facilitate any of the benefits mentioned above. That’s a fact. The Federation of Small Businesses (FSB) issued a report ‘Time is money’, which revealed that 52% of respondents of the survey experienced late payment, and 25% suffered increased late payment.
According to the FSB report, 37% of respondents have applied for credit to manage their cashflow due to late payment. In addition, Business in the Community (BITC) member, Sage, a market leader for integrated payment systems, found that late payment prevents businesses from future investments and causes staff pay cuts or redundancies. Late payment can be detrimental to any business’s health, affecting the cash flow and “lifeblood of any business” said CEO of Sage, Steve Hare. Even worse, an estimated 50,000 businesses will go under due to late payments by the end of the year (FSB, 2023) with small businesses most at risk. This is aggravated in times of increased costs, inflation and the cost-of-living crisis. It is becoming a big problem: according to the Domino Effect Report (2017), issued by Sage, businesses of all sizes are guilty of not paying promptly.
Liz Barclay, Small Business Commissioner, is challenging the term ‘prompt payment’ and argues that businesses need to be paid quickly. She believes that a ‘prompt payment within 120 days for example, is not acceptable. She also adds: “Quick payment is crucial for UK productivity and for the economy to thrive.”
However, if businesses pay other businesses promptly, there is a positive ripple effect. Businesses can plan better, leading to greater job security for their employees. Employees that feel more secure in their jobs tend to feel more satisfied and perform better, and happier employees means better customer experience and products for your customers. Businesses can prosper and the cycle continues.
15% of BITC members have already committed to prompt payment, including leading UK banks, Santander, NatWest and TSB. TSB has even committed to pay 96% of its SME suppliers within just seven days. While these organisations are taking an important step in responsible payment, with 6 million UK businesses, it is important that more get on board.
Prompt payment is one of our recommendations, however, there are other key aspects we offer support and resources for a more resilient future- proofed responsible business, which is better business for people and planet
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