Comment: Christmas with a pandemic doesn’t just threaten retailers

Comment: Christmas with a pandemic doesn’t just threaten retailers

Christmas is coming, and plans are being put in place to prepare for what will be a unique festive period, marking the culmination of a year of unprecedented economic and social turbulence

Christmas is the busiest time of year for retailers and, although last year was a record low for the UK retail sector’s Christmas performance, this year could be even worse if suppliers are not paid promptly.  

The lengthy payment terms small suppliers are subjected to, pre-date the pandemic and were unsatisfactory during times of normality. However, these have become unacceptable in times of crisis. Previse’s own research shows that in March this year, late payments almost doubled compared with the year before and continued at high levels throughout April as lockdown took hold. Clearly, there is a direct link between economic uncertainty and already lengthy payment terms becoming even longer.  

Just as recovery seemed to be on the horizon and the UK’s small business community edged towards reactivation, Britain has been plunged into further uncertainty. Cities around the UK have gone back into lockdown, with London being the latest to face further restrictions. 

With Christmas fast approaching and orders being placed, the future of the UK’s small business community hangs in the balance.  

Most small suppliers will not be paid until well after Christmas, with the average payment length of 37 days likely to be stretched as companies seek to hang onto their cash reserves in the face of another lockdown. At their longest, payments can reach over 120 days. All the time that suppliers are waiting to be paid, their dented liquidity position makes them less equipped to fulfil other orders during the time of year when  they do most business. 

To add to the mix, many of the government-led schemes, which were introduced to support small businesses during the crisis – such as CBILs and the furlough scheme – are soon to end.  

One in six smaller firms now relies on government-backed debt; so, with these lifelines removed from small suppliers’ reach, the next few months do not look promising and supplier are at huge risk of collapse.

Retailers need to act now to help support the suppliers that will fulfil their orders in the months ahead.  

Paying suppliers instantly is one thing that businesses can do to save the suppliers they rely on and help save the small business community.  

To indicate the scale of the chronic late payments problem, every year in the UK alone, 50,000 businesses are driven to bankruptcy while waiting for late payments and, in Europe, €360bn of unpaid bills are written off. And that was in times of normality. The huge financial strain that small suppliers are put under every day is set to come to a head in a crucible of misery this Christmas unless we act now. 

The good news is that if corporates move swiftly to pay suppliers instantly, the small business community improves its chance of survival.  

The technology is available to get all suppliers – even the smallest – paid immediately. 

What’s more, large corporates can adopt instant invoice payment policies in a way which would also be sustainable long-term for their own cash-flow. The technology and processes exist to enable suppliers to access cash immediately without buyers having to speed up their own payment processes. A true win-win for both sides. 

There is an urgent need to address the chronic issue of slow payments before it is too late. In doing so, we can kickstart our economy and create better job security for the 16.6 million Britons employed by SMEs.  

If businesses work in harmony to pay SMEs on time, it is possible to ensure that Britain’s SMEs might have a merrier Christmas to look forward to. 

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