Paul Christensen, CEO of Previse reflects on a tough 2020 and looks ahead to 2021.
2020 has been a hard year for British businesses, from the UK’s smallest suppliers to its most powerful retailers, none have been infallible to the impact of Coronavirus.
Arcadia’s collapse into administration highlights just how precarious the UK’s market is. The demise of Philip Green’s retail empire, and the fire sale of Debenhams, demonstrates that now is not the time to carry on business as usual – it is the time for renewal.
Throughout many industries, digital transformation has been delivered at an unprecedented rate over the last twelve months. From the NHS to SMEs – we have come together to explore new ways of doing things, support one another and, crucially, get the job done. The supply chain shouldn’t be any different.
One thing which every business can do to help build a more resilient supply chain and support the small business economy, is to pay suppliers quickly. Fast payment helps SMEs to plan for the future. It gives them the confidence to invest and to employ more people. It keeps cash moving quickly throughout the chain. We look at some steps that every large corporate can take to ensure that they and their suppliers have a merrier Christmas and prosperous 2021.
Let’s make slow payments a thing of the past
In 2021, increasing numbers of suppliers will demand to be paid quickly as fiscal conditions tighten. A demand which, until recently, has all too often gone unheard.
Before the pandemic, late payments to suppliers amounted to over £23bn per year, according to Pay.UK research. Additionally, since the pandemic, buyers across many sectors have pushed for longer payment terms, which squeezes suppliers’ cash flow even further. SMEs are the worst hit. SME turnover alone is estimated at a whopping £2.2 trillion annually. From drivers and farmers to beer brewers and bakers – small businesses are the backbone of our economy and will drive our recovery.
Yet, The Federation of Small Businesses found that 62% of small businesses had experienced either an increase in late payments and/or had payments frozen completely as a result of Covid-19. And as unsecured creditors, if their customers go bust they have very little chance of recovering their invoice values.
This puts the whole supply chain at risk of financial difficulties, which, in turn, has a severe impact on the others that rely on these suppliers. This ‘contagious’ effect of financial distress and potential closures exacerbates the economic hardship faced by British businesses.
Every small supplier deserves the right to day one payment. If businesses work in harmony to pay their suppliers faster, Britain’s economy will thrive. Now is the time to invest in our SMEs and provide security to the 16.6 million Britons they employ.
Digital transformation will drive us forward
Paying invoices on day one isn’t just good for suppliers, it’s good for corporate buyers too. By doing so, businesses can benefit from significant process efficiencies, and contribute to a healthier supply chain. According to the Harvard Business Review, securing supply chains without losing competitive edge will be a high priority for companies in 2021. Paying suppliers faster demonstrates a real commitment to sustainability and strengthens supply chains at very little cost.
Large corporates can adopt instant invoice payment policies in a way that would also be sustainable long-term for their own cashflow. The technology and processes exist to enable suppliers to access cash immediately without buyers having to speed up their own payment processes.
2021 is the year to build back better. Now is the time to treat each other fairly and come together to find new solutions as we seek the green shoots of renewal. Paying suppliers instantly is the single largest contribution any business can make to improve supply chain resilience. Adopting smarter technology will be a part of this.