How can this be okay?

Salt is now in its second year, and things are going well. We’re getting busier by the day, with lots of new clients coming on board and existing work expanding into new areas. So how come our cash surplus is disappearing before our eyes, and our bank balance is fast approaching zero?

It’s no surprise that cashflow is one of the biggest challenges for any business, especially a start-up. We started our business with nothing – no clients, no funding, no loans and no overdrafts – so we knew it would take a while to get things going. Once that started happening, thankfully only a few months in, we were able to play catch up and keep ourselves afloat. Small and midsized companies generally seem to understand and appreciate this situation, and manage their finances accordingly to honour their payment commitments to the letter. Unfortunately, we are seeing more and more cases where the larger, global organisations do not.

Large corporations, with annual revenues over $30bn, appear to have a systematic culture of late payment, and I am yet to work out why. Is it because those extra weeks keeping hold of your budget gives them an advantage? Is it just laziness or inefficiency? Is it that they simply don’t appreciate that withholding funds can put small businesses at risk? Or is it a power trip – they know they can get away with it? Who knows. An awful lot of time and energy is put into negotiating a contract, yet it seems to mean very little when one side can break it at will. Somehow dealings between two businesses don’t need to conform to the same principles we might put on a person-to-person interaction, and it makes it okay to break the rules without explanation, apology, accountability or consequences.

Being business to business can make the conversation, decisions, actions and principles less human, so it suddenly becomes okay not to pay people what you owe, blaming the system and the rules rather than seeing that it is clearly unfair and taking responsibility. I see no reason why commitments should be any less important in the commercial world than they are in the personal world, particularly if the relationship is valued. And that’s always a sticking point – the clients we work directly with do value the relationship, as do we, so inevitably it is the small businesses that have to compromise in order to maintain it. It is the small business that is asked to start work without a PO, deliver work with no idea of when they might be paid, and take on all the financial risk and burden associated with doing a good piece of work in the spirit of ‘partnership’. It’s totally out of balance, and plays on people’s good nature, willingness to do good work and not wanting to be the one who prevents something from happening. And clearly, a small business is never going to sue a global corporate entity for not fulfilling their contractual obligation to pay on time, so all is well.

Or is it? Is it okay for small business to bankroll gigantic corporate entities? Should we be taking all the risk, uncertainty and cost of bridging the gap? Should we accept that so many good small businesses go under because of these sorts of practices?

We operate our business fairly. That means we pay our associates and partners on time, and we respect their need to run a business as much as we do our own. Because for us, money committed is just that – a commitment, a promise, and fair remuneration for good work. Working this way leaves us exposed in the middle – honouring our payment commitments without being able to rely on the same for our income. Some people may say it’s naïve, but we feel good business is all about being true to your principles. Agencies don’t want to be in a relationship where all the power sits on one side. We choose to work with people who respect us for what we do, are excited to be a part of our journey, and are willing to push on our behalf. And there are plenty of those around.

Right, now I’m off to press refresh on our online banking…