Late payments threaten small and medium enterprises – Cape Chamber
POLITICS WEB / 17 NOVEMBER 2019 - 15.55 / GEOFF JACOBS
Making small suppliers wait more than 30 days before paying them delivers a double blow to the economy because when times are tough and jobs scarce, it is small business that that steps up to the plate, often able to grow employment while larger corporates shed jobs.
“Paying bills on time should be a national duty for large corporates, government departments, provinces , municipalities or individuals,”says Geoff Jacobs, President of the Cape Chamber of Commerce and Industry.
“The news may be dominated by non-payment of electricity bills by municipalities and state-owned entities like South African Airways and Eskom but it tends to ignore the serious knock-on effect of late payment on the small end of the private sector.
“While bigger corporations can borrow to bridge a cash flow problem, small business operators cannot. For them late payments don’t merely hurt, they can kill. As others have noted, late payments are the assassins of small businesses”, Jacobs said.
A Small Business Institute survey has found that some bigger businesses treat small ones “as a line of credit”, some paying in 130 days not thirty. Nearly half of late payments were being written off as bad debt.
Government is far worse. According to the Department of Small Business Development, in one month it found that 71 883 invoices worth R4.3bn and older than 30 days were unpaid by government departments. Another survey found in one month more than 23 000 invoices for a total of R2 billion were paid late by provincial government departments.
"Small businesses rely on a regular cash flow to pay wages, promote their products and services, and invest. If the flow stops for more than 30 days, it can mean that the business fails and with it more people become unemployed.
“It’s time we realized that paying small business invoices on time stimulates the economy, gives them stability and confidence to grow faster, have a better cash flow, and employ more people. In short everyone will benefit.
Globally, the majority of registered businesses are small businesses. Although they each employ less than 25 people, this accounts for two thirds of the entire working population. South Africa lags far behind, with our small business sector employing less than a third of those of working age.
“We can and must do better. Paying bills on time should be a priority, and in this regard, the private sector should set an example,” Jacobs said.
Disclaimer - The views expressed here are not necessarily those of the BEE CHAMBER