The environmental, social and governance impact and responsibilities that all businesses have – often referred to as the ESG agenda – is a big priority at the moment. Organisations of all shapes and sizes are recognising that they have a duty to try to make the world a better place, whether that’s by lowering their carbon footprint, boosting investment in their local community, or making sure they’re governed properly and fairly.
At Saltare, we think that early payments are one of the best ways for organisations to drive social value – and make a real difference to small businesses in particular. Here’s why.
What is social value?
Social value is essentially an umbrella term for how much value an organisation provides to society. It’s a measure of the impact they have on social factors around them, from wellbeing to efficiency, productivity and profit.
How can early payments create social value?
Late payments cause no end of problems for everyone involved in a supply chain but in particular for SMEs. It’s a huge concern for our CEO, Anthony Persse, and something we’re trying hard to fix.
“Businesses don’t fail because of lack of profit, the primary reason they fail is that they run out of cash.”, says Anthony Persse, CEO at Saltare. “Cash is absolutely critical to business survival and the wellbeing of a business owner. So, it’s unsurprising that a significant part of a small business owners time is spent chasing cash from unpaid invoices.”
“There’s a huge amount of evidence highlighting that many small businesses are paid late. If invoices are accurate and timely, and goods or services are delivered as promised, there should be no excuse for late payment. In fact, what if we could go one step further than just paying on time – and think about meaningful incentives for paying early, instead?
“It’s time to turn the ‘late payment challenge’ into an ‘early payment challenge’ – and reverse the negative impact of late payment into a positive one of early payment.”
Injecting cash into the supply chain
Having a strong and sustainable supply chain, based on solid relationships, is one of the most critical tools any business can have in their arsenal. Late payments cause more problems than just hold ups in supply chains – they stop both buyers and suppliers having the tools they need to succeed and grow.
What’s more, they can cause reputational damage too – and, as you’re only as strong as the weakest link in your supply chain – that’s not a risk worth taking. Early payments could be the key to things running smoothly.
Giving the gift of time
Rather than spending time chasing payments or tracking down customers who’ve gone quiet, imagine if small business owners could focus exclusively on what they’re best at – running their business?
The cost of lost opportunity due to payment chasing is hard to quantify, but a study by Tide in Jan 2020 reported that up to 900,000 hours a day was spent by small businesses chasing payments. If approximately 1 hour a day is spent chasing payments – that amounts to 14% of an average working week.
It works both ways, too. If SMEs are chasing payments, that means their customers’ finance teams or invoice departments are the ones being chased – and spending time fielding and replying to enquiries.
Just think what both busy SMEs, and buyers’ finance teams, could do if they had that time back.
The human cost
Finally, but perhaps most importantly, early payments can hugely reduce the human cost that late payments have for SMEs.
Given that cash is so important to small businesses, it’s no surprise that having the confidence that you’re going to get paid (and knowing exactly when) is a big priority for business owners. Not knowing causes stress, worry, and anxiety – which can ultimately damage overall wellbeing, according to Pay UK.
That uncertainty also makes it harder to make decisions about investment and recruitment – and even paying your suppliers, too.
How Early Pay can help
Early Pay works for the entire supply chain – and effectively levels the playing field. It’s all about transparency, with simple, clear communications for both buyers and suppliers. Knowing when and how people will be paid is a great start, but Early Pay also offers the chance to be paid early, too – in exchange for a small discount. If that sounds like something you’d like to implement into your ESG agenda, get in touch with one of our team.