2023 Summer Intern, Communications, U.S. Chamber of Commerce
July 31, 2023
Small suppliers and vendors are a critical part of our country’s business ecosystem. The U.S. Chamber’s Prompt Pay Pledge asks companies to commit to paying their suppliers and vendors quicker or offer private financing options.
Four of the U.S. Chamber’s Small Business Council members weigh in on why prompt pay is so important for their business and why they signed the pledge to pay their own vendors quicker.
Meet the small business owners:
- Jeff Good owns Mangia Bene Inc. Restaurant Management Group. Based in Jackson, Mississippi, the group manages three restaurants: BRAVO! Italian Restaurant, Broad Street Baking Co, and Sal & Mookie’s New York Pizza & Ice Cream Joint.
- Doug Klein is the Chief Financial Officer for New Use Energy Solutions. Headquartered in Phoenix, Arizona, NUE leads the development and distribution of mobile solar generator systems that deliver clean, renewable power wherever needed.
- Bahar Ferguson is the President of Wasatch I.T., Utah’s largest locally owned I.T. and network services company serving over five hundred businesses annually.
- Tom Richter is the Regional Franchise Developer for JAN-PRO of Utah, a commercial cleaning service with franchise operations across the region.
What are the consequences for small businesses if invoices are consistently paid late?
Jeff Good: As a restaurant we are pretty much a cash and credit card business, but we do have house accounts and in house charges that we hold the paper on. When our customers are slow to pay, it causes issues with extra office work, worries about bad debt and overall inconvenience.
Doug Klein: For most small businesses, and very much including NUE, receivables tie up a significant amount of limited capital/cash. When receivables grow, this displaces our ability to purchase inventory or otherwise invest in other aspects of our business and therefore severely limits our growth.
What are the benefits for your small business when invoices are paid on time?
Doug Klein: When we know that invoices will be paid as agreed, we can plan cash flow and invest sooner than we would be able to when payment is extended.
Jeff Good: Cash flow, no extra accounting worries, and ease of office operations.
Tom Richter: The specific benefit is cash in the bank faster.
How can prompt pay improve the relationships between small suppliers and their customers?
Bahar Ferguson: Prompt payment better allows small businesses to maintain the same level of service, support, and quality they have committed to providing customers. Prompt payment allows them to meet their financial obligations without having to cut corners or compromise on the excellence of their offerings. With consistent and timely payments, small suppliers can effectively plan for their business needs. They can attract and retain talented professionals, invest in the necessary tools and technologies, and secure essential supplies. This ensures that they can continue to deliver exceptional products or services to their customers, fostering customer satisfaction and loyalty.
Doug Klein: Prompt pay allows us to use capital to innovate and become even more useful/valuable to our customers.
Jeff Good: A small business’ bargaining power comes from paying bills quickly. I enjoy a premium discount and service relationship with my food and service providers because I pay quickly. So for me, being #1 in quick payment gives me strength.
What advice would you give to small businesses that may be struggling to receive prompt payment from their customers?
Bahar Ferguson: It is crucial to establish clear and concise payment terms. Clearly communicate when payments are due and outline any penalties for late payments. This helps set expectations from the beginning and minimizes confusion. Additionally, it's important to enforce your payment terms consistently and timely. Be proactive in following up on overdue payments and clearly communicate the consequences for non-payment. Consider implementing a system where services or deliveries may be temporarily halted until payment is received to help motivate late payers. Lastly, explore options for diversifying your payment methods. Offering convenient and secure online payment options can encourage prompt payment from customers. Make it as easy as possible for them to fulfill their financial obligations to your business.
Tom Richter: The squeaky wheel gets the grease. It is critical to make sure of the terms before starting to do business with a client. Also, it seems the larger the customer, the longer they want to take to pay bills. Oftentimes we are able to negotiate different terms than what they are proposing.