There is a harsh reality for small business owners who do not get paid immediately. I saw a company founded by a friend go bankrupt because a customer didn’t pay their bills on time. Some of them were over 100 days late on their payments.
Such overdue invoices can hinder the management of small and medium-sized enterprises, and in the worst case, the small and medium-sized enterprises may be driven out of business. Unfortunately, this scenario is all too common for small business owners.
I wish it wasn’t, but when I ask groups of small businesses if their customers are paying on time, there are always examples of late payments. But here at the American Chamber of Commerce, we are trying to change that reality.
That is why the American Chamber of Commerce Immediate payment pledge Ask large companies to expedite payments to small and medium-sized suppliers and vendors.
Small businesses account for about half of America’s GDP, provide just under half of the private sector jobs, and are responsible for two-thirds of net new job creation. When the small business economic engine stops, so does the national economy.
We hope that our efforts will bring attention to this alarming phenomenon that has received little attention nationwide.
How Prompt Pay Pledge Helps Small Business Suppliers
Signing an Immediate Payment Pledge is easy and can be completed in minutes. on the U.S. Chamber of Commerce website. When a company signs the pledge, it commits to:
Offer fast or expedited payment of invoices and/or seek to find financing solutions that allow small suppliers to access working capital at low cost
Clearly communicate payment policies and terms to small business suppliers and vendors
Once a company signs the pledge, it will be recognized on the U.S. Chamber of Commerce website and communication toolkit Spread the word about instant payments and be the first to learn about new resources and events dedicated to instant payments.
Our Prompt Pay Pledge website currently offers a variety of offers including: How big companies can contribute to helping small businessesspeeding up payment processing, helping small businesses adapt to technology, and leveraging small business suppliers in their operations.
We also have several small business resources focused on customer payment terms and recommendations that are so necessary to keep your small business healthy.
If a small business supplier does not pay within 2-3 months after being invoiced, the small business owner will have to cover the payment difference themselves. The combination of rising costs from inflation and tightening credit from rising interest rates may make it impossible for SMEs to cover their own payment gaps or access bridging loans.
Inflation remains top concern for small businesses for fifth consecutive quarter, according to latest report MetLife Life and U.S. Chamber of Commerce Small Business Index.
Rising prices put further pressure on small business cash flows. Getting paid sooner is one way to relieve that pressure.
Fast payments can bring additional benefits for businesses large and small. We hear from many large companies that they are looking for good suppliers to diversify their supply chains. As a result of our efforts, we expect some great small businesses to actively pursue deals with companies that have instant payment pledges.
Prompt payment pledges are part of the Chamber’s daily commitment to helping all members (businesses large and small, businesses in every sector of the country, in every state) continue to thrive. It’s just
We are always looking for ways to improve the ecosystem that exists between large and small businesses. I am truly encouraged by the support and partnerships we already have on this endeavor. And we are just getting started.
Note: A version of this article was originally published by Vistage, an executive coaching and peer advisory organization and a founding partner of the US Chamber of Commerce’s Prompt Pay Pledge.Read Vistige’s article here.
About the author
Thomas M. Sullivan
Thomas M. Sullivan is Vice President for Small Business Policy at the U.S. Chamber of Commerce. Working with a national network of Chambers of Commerce and the National Chamber of Commerce, Mr. Sullivan harnesses the voice of small businesses and transforms their grassroots power into federal policies that promote free enterprise and reward entrepreneurship.he runs the usa