The trouble with being an SME that deals with big business
As an SME, entering into a business contract with a large corporation can seem like a fantastic windfall – guaranteed payment and a huge lead from which you can build the company further.
However, the reality is that dealing with big business as an SME can be harmful for your cashflow. 2017 research from Xero shows that 79 per cent of surveyed small-to-medium operators want the government to intervene on big business payment times, citing severe consequences for their own companies. It is essential that before entering into any transaction, you work out the true value of the contract. At the end of the day, what will you walk away with? If you are aware of the traps of the agreement and how you will benefit, then you are best placed to make a sound commercial decision.
The cashflow gap is real – and large
A Financial Systems Inquiry (FSI) study found that nearly 70 per cent of Australia’s workforce is in the employ of an SME. That’s a huge number of workers who can find themselves at the mercy of a single corporate entity.
Late invoice payments from big businesses can wreck Australian SMEs.
The FSI has noted that SMEs find it much harder than larger companies to secure financing, reinforcing the importance that contracts are honoured and the cashflow gap minimised. This means small businesses in Australia have to do everything they can to make sure big companies pay them on time, all the time.