Whether you’re a buyer or a supplier, businesses of all shapes and sizes are striving to recover from the financial effects of the pandemic. Here’s why we think encouraging early payments could play a key part in helping you do just that.
It’s no secret that – despite recovery packages and businesses’ best attempts to keep afloat – the past few years have been tough going for most organisations. With a firm focus now on recovering from the financial impact of the pandemic, in a still volatile global market, keeping a tight hold on any factors that we can control is front and centre of most people’s minds.
And maintaining a healthy supply chain, built on a strong foundation of commercial relationships, reliability and trust, is just one of those factors.
The government has set out a Social Value Model to help organisations do just that.
What is the Social Value Model (SVM)?
The SVM is a set of priorities that the government expects public sector bodies to apply when buying from the private sector, with the aim of boosting social wellbeing, reducing poverty, and keeping things fair. It’s aimed at helping businesses recover economically by encouraging collaboration – all designed to boost businesses’ ability to level up and achieve or retain success.
How do early payments come into that?
Paying suppliers on time is a huge part of maintaining a strong supply chain, and it’s something that’s set out clearly in the SVM.
Recognising that lots of SMEs (small and medium enterprises) or VCSEs (voluntary, community and social enterprises) are kept waiting by late payments, which has a knock-on, negative impact on their cashflow, the SVM encourages prompt payment to recognise the value of these types of suppliers in overall supply chains – all while supporting entrepreneurship, too.
What’s the impact of late payment?
There are around 5.8 million SMEs in the UK, which means they make up over 99% of all businesses in the country. Eight in ten of these businesses are having to wait over a month beyond the terms they agreed with their clients to get paid.
Bacs Payment Schemes, now part Pay.uk, did some research into what happens when SMEs are kept waiting for their money. They found that over a third use their overdraft facilities just to meet their monthly payments, that 43% are spending around £4.4 billion in late payment related admin costs and that more than one in ten SMEs have been forced to hire new recruits to chase unpaid bills.
It’s a social problem, too, with a ripple effect on the wider community. As Intuit QuickBooks found during global research in April 2020, one in seven small businesses have found themselves unable to pay their employees – a situation that has affected 2.2 million individuals.
And at Saltare, we just don’t think that’s fair.
Be part of the solution
Let’s park the idea that late payments are bad, for a second – and start thinking instead about the positive impact that early payments could have.
Our Non-Executive Director, Philip King, believes there’s genuine value in paying suppliers on time, or even earlier when possible:
“In the 21st century, with the technology that we all benefit from to move money around, 30-day payment terms – or even longer – are simply behind the times, and delayed payments can have devastating consequences for small businesses and their owners. Almost every modern business has the opportunity to play their part in adding Social Value and contributing to economic recovery in their communities while, at the same time, building a stronger and more resilient supply chain.”
With that in mind, the good news is that all types of businesses and organisations can play a key part in contributing to social value in the community. It’s one of the key reasons we set up Early Pay – and it couldn’t be simpler to get involved.
What is Early Pay?
Early Pay is a fully flexible scheme that means you can offer to pay your suppliers early in exchange for a discount. As well as saving you money, it supports your suppliers’ cash flow – meaning they can reinvest, expand, or pay their suppliers; whatever gives them the boost they need.
On top of that, with Early Pay, you can offer early payments to suppliers in any industry, in any country and in any currency.
Which means there’s no limit to the amount of social value you can support. And no limit to how much money you can save – all while helping to speed up economic recovery.
Get in touch
You can find out more about Early Pay at saltare.io