Business Partners’ managing director Ben Bierman said on Tuesday they had found from interactions with their small business clients that both big corporates and government departments did not pay small businesses on time. Bierman attributed this to intricate and bureaucratic payment processes and systems.
“The way a business manages its working capital and the speed of its cash conversion cycle ultimately impact its overall profitability,” he said.
“Put simply, to produce and sell a product or service a business incurs costs, including wages and raw materials, and if it does not receive payment during a certain time period for the product it has manufactured, or the service it has provided, the business cannot purchase new material, pay staff or overheads and, as a result, its profitability and ultimately its survival is threatened.”
Business Partners said reasons usually given for late payments included incorrect invoicing by small businesses.
“This was, however, not where the main problem lies. Late payers usually have their own challenges, which include being disorganised in their supply chain and payment processes, and therefore not knowing which payments should be paid and by when. As such, they fail to plan to have sufficient funds available to pay their creditors timeously. On very odd occasions, late payers are also waiting to be paid by their debtors, so it is a perpetual circle of waiting.”
University of KwaZulu-Natal entrepreneurship and small business development expert Lindiwe Kunene said that she knew of small businesses whose owners gave up and shut down due to non-payment.
“Entrepreneurs should try not to solely rely on the government or one client,” she said.