Late payments threaten small and medium enterprises - Cape Chamber
JOHANNESBURG - Late payments by big companies, government departments and municipalities, among others, for goods and services provided by small and medium enterprises are damaging to a sector that often steps up to provide jobs when larger corporates shed them, the Cape Chamber of Commerce and Industry said on Friday.
Small suppliers say they often have to wait more than 30 days to be paid for their services, hurting their operations as they cannot easily borrow to bridge cash flow constraints.
“Paying bills on time should be a national duty for large corporates, government departments, provinces , municipalities or individuals,” Cape Chamber president Geoff Jacobs said.
"The news may be dominated by non-payment of electricity bills by municipalities and state-owned entities like South African Airways and Eskom but it tends to ignore the serious knock-on effect of late payment on the small end of the private sector."
"While bigger corporations can borrow to bridge a cash flow problem, small business operators cannot. For them late payments don’t merely hurt, they can kill. As others have noted, late payments are the assassins of small businesses," Jacobs added.
A survey by the Small Business Institute found that some bigger businesses treated small ones “as a line of credit”, with some paying in 130 days instead of 30. Nearly half of late payments were being written off as bad debt.
The government's conduct in this area is worse, with the department of small business development finding in one month that 71,883 invoices worth R4.3 billion and older than 30 days were unpaid by government departments.
"Small businesses rely on a regular cash flow to pay wages, promote their products and services, and invest. If the flow stops for more than 30 days, it can mean that the business fails and with it more people become unemployed," said Jacobs.
“It’s time we realized that paying small business invoices on time stimulates the economy, gives them stability and confidence to grow faster, have a better cash flow, and employ more people. In short everyone will benefit."
He noted how, globally, the majority of registered businesses are small firms. Although they each employ less than 25 people, this accounts for two thirds of the entire working population.
"South Africa lags far behind, with our small business sector employing less than a third of those of working age," said Jacobs.
"We can and must do better. Paying bills on time should be a priority, and in this regard, the private sector should set an example."
- African News Agency (ANA)