Is Big Business Cramping Your Cash Flow?

Posted by on Jul 6, 2016 in Blog

Is Big Business Cramping Your Cash Flow?

Being the small fish in a big pond is hard enough for many businesses as they struggle to find their niche, improve their cash flow, source customers and develop their brand. However as latest statistics show, that is not the only problem small businesses are currently facing in the Australian economy today.

Big Businesses Are Taking Advantage of Small Businesses

In a worrying trend, large businesses are using their size to dominate the market by delaying their payment of invoices to small businesses by up to 50 days and beyond. Small businesses send out their invoices in good faith that larger businesses that have the funds at the ready will pay promptly. But it doesn’t seem to be the case. And this is having disastrous effects on small business across the whole of Australia.

Many small businesses (approximately 2/3) are taking out loans or accessing their private funds to keep their businesses afloat while they wait for the money to come in.

Poor Cash Flow Affects More Than Business

It’s not just about the money, though. When you are worrying about cash flow, it is often hard to focus on business growth and development, and creativity can seize up. Your business, once enjoyable to manage, becomes nothing more than a chore. Innovation is unable to sourced in any direction. It often feels like a tedious treadmill when cash becomes problematic. And it can begin to impact on relationships and financial situations at home.

Big businesses can seemingly do what they want and get away with it – their size and power obviously have a lot to do with it. It is not as if small businesses can go elsewhere as many rely on the money they bring in. In short, it is a worrying trend for the economy. Banks are noticing that many businesses have less cash flow, and it is a concern for everyone. While the mining and retail industry seem to be the most adversely affected, it is occurring in other non-related industries as well.

There is talk of a Prompt Payment Protocol (PPP) being introduced. This will ensure that businesses toe the line and pay within standard business terms – no later than 30 days. The UK introduced a Prompt Payment Code (PPC) back in 2008, and all signs show that signatories are now paying up to 12 days quicker. Even more importantly, the analysis indicates that signatories to the UK code represent over 60% of the total UK supply chain value. If and when the PPP is introduced in Australia, we hope to see it reach at least 60% of Australian businesses, if not more, to make a significant difference.

Have you noticed that the big businesses you trade with are not paying as promptly as they used to? We would love to hear from you if that is the case.