Small businesses are the backbone of Britain. They actually account for 99.2% of all UK businesses.
But small businesses don’t have deep pockets.
In fact, it’s not their ability to do a job which makes larger firms attractive. Small businesses are hungry for the work and will always go the extra mile to get things right. No – larger firms get the cream of work because they have the financial strength to cope when times get hard.
And times are getting hard. We are entering a time of intense unpredictability. We’re experiencing energy price fluctuations which five years ago would have been inconceivable. We’re seeing supply chain complexity that’s pulling apart what used to be a very comfortable globalised view of trade.
In complex times like these, what small businesses want to survive isn’t necessarily a lot more money. It’s certainty. I speak regularly about the mental health of small business owners, and they never say to me that their confidence would increase if they were to charge 5% more. They fully understand the nature of their chosen business – the margins, the opportunities and the costs.
When you have your own bills to pay and dinners to put on the table of 2-3 employees who depend on you, the greatest drain on the mental health of owners of small businesses is a lack of certainty: waiting for payment and not knowing whether it's going to come or not.
Certainty means SME owners – who don’t have their own receivables department – don’t have to chase bills. It also means peace of mind. And it doesn’t usually matter on what day a bill will be paid; so long as there is clarity and certainty that it will happen when it’s been promised; because the business can then operate with that certainty.
Interestingly, I’ve had this debate for many years with government ministers, who have been trying to understand the complexities of payment terms. A classic conversation will see ministers wondering whether shorter payment terms – say 14 days – would make much of a difference. And it wouldn’t! Of course it would help their cash flow but many SMEs don't really mind longer payment terms, especially if it means they can benefit in some way. What they really want to know is that if 60 days are agreed, then they will get their money as promised on the 60th day. A platform like Bluechain makes flexible payments easy for SMEs to accept and also opens up a digital channel of clear communication so that they always know where they stand.
If you really want to support small businesses, benefit from their commitment and broaden your supply chain, give them the basic communication to know when they’ll be getting paid. It’ll be worth the world to them, and it’ll pay dividends for you.
Philip King has 42 years’ experience in credit management and related disciplines. He was Chief Executive of the Chartered Institute of Credit Management from 2005-2020. He also served as Interim Small Business Commissioner from 2020-2021, supporting small businesses in their trading relationships with large customers, particularly in relation to payments.