Struggle can be expected in the early years of a business. There’s many growing pains and adjustments to acclimatise too. With political and economic friction set to make things even more difficult for SMEs, it’s more important than ever that these firms stay afloat with their finances. With Birmingham having the largest number of start-ups outside of London, and a reputation as one of the UK’s most entrepreneurial cities, for these businesses everything depends on their finances!
Late payments are the blight of SMEs here, and can include anything from office rent payments to salaries and invoicing freelancers. Delayed payments can eventually fuel a downward trajectory across all aspects of the business; performance, reputation and prospects. It all stems from absent payments.
Consequently, in more specific terms, here’s how late payments can impact the SME.
Performance
It’s the obvious answer, but it’s crucial to mention all the same; the SME that has late payments will always lag in performance. In no way do small businesses benefit from avoiding owed costs. Instead, debt starts to tally up, staff leave and progress gets significantly stalled, often to a point of crippling the small business’s future. Put simply, late payments are a showstopper for the SME that bring all their processes to a grinding halt.
When performance is stunted in such a fashion, the opportunities to grow, expand and further the company mission become mere pipe dreams. There’s no way to bring them to fruition without the required funding. Suddenly, smaller companies find themselves boxed in, and it can take years for them to break free of those limitations. While they can certainly employ smarter strategies to combat late payments like invoice discounting, it’s highly important late payments are avoided from the get go.
Reputation
Because SMEs are so small and vulnerable, a lot is riding on their reputation. Are they smart? Are they efficient? Customers, business partners, employees, and investors all care about the answers to these questions. They inform them on whether they can trust the business, and more importantly, if they should ever consider being associated with them in any way.
Therefore, it’s incredibly vital that businesses make all their payments on time. It builds that trust between the SME and whoever they deal with and builds their credibility from the ground up. When a small business can keep their word and back up their promises with the cash, it builds better business relationships, which subsequently fuels the SME onto a more prosperous future.
Prospects
Ultimately, making payments on time prove that an SME is responsible, hardworking and sensible. There’re no unrealistic ambitions clouding the reality of how the business runs, and there’s no egos compromising everybody’s future. In the world of business, one mistake can tear everything asunder, so it’s highly important the SME’s develop a bulletproof financial situation.
When payments are made on time, the leftover money can be spent elsewhere; dealing with suppliers, offering staff bonuses that retain workers, equipping the workplace with the latest equipment, and so forth. All these efforts wholly contribute to enhancing the prospects of the SME. In the end, the businesses that’re content with late payments can buckle up for bankruptcy, and the rest can enjoy success!
