PayIn30, a lifeline for SMMEs during the COVID-19 crisis

When we’re kids, and teachers ask, “What do you want to be one day”, answers like doctor, lawyer, police officer, singer, and the like, are often tossed around. In primary school, asking this is enough. However, perhaps it’s important to start considering “How do you want to be paid” as a valid and necessary question. If you work within an organization, you’d be paid fortnightly or monthly depending on where you are in the world. However, this principle oftentimes disappears for people rendering work to organizations. Bigger corporations have kept standard payment terms which remunerate their service providers, namely small businesses, within 90 – 120 days: or in layman’s terms, 3 – 4 months.

For small businesses, cash flow is the difference between being able to operate and having to shut down completely. In creative spaces, cash flow is the difference between being able to complete one gig and book the next one. As an example, let’s look at the photography industry. Costs to shoot include equipment maintenance or rentals, transportation, food, data, and sometimes accommodation. Paying a photographer three months after the fact would render their small business defunct because how could they possibly book the next gig without accessible cash?

“The most devastating part of not being paid on time in our business has been the fact that late payments delay other payments for us. And our late payments really suck because most of the time they’re not going to businesses but they’re going to independent contractors who really depend on these payments to make a living or to be able to feed their families or feed themselves. So, if a company pays us late, that means that the knock-on effect is felt very severely by the people at the bottom of the food chain, and that is not just us but the independent contractors that we contract to work on some of our jobs with us.” – Austin Malema of RTC Studios.

Contrary to what has been shared this year, COVID-19 cannot be used as the rationale for paying SMEs after 90 – 120 days. Prior to COVID-19, before March 2020, corporations often paid service providers 3-4 months after the work was submitted and approved. When COVID-19 hit us, the practice was maintained and said to be COVID related, as such all payments were delayed. This, however, left small business owners in the lurch. Before COVID, this type of delay in payments was uncomfortable. If you were a creative, your rent, food, transportation, and so much more would be at risk because of clients failing to pay in a timely fashion. This isn’t to say there was failure to pay, but the stress of that happening would give anyone a grey hair or two. With a global pandemic interrupting business operation and a national lockdown that only allowed “essential workers” to continue operating, not having cash flow to sustain your business was debilitating.

Thankfully, the tide seems to be changing. Corporate South Africa has recently shown support for paying SME suppliers in 30 days through the #PayIn30 initiative. Busi Mavuso, CEO of BLSA and Seerco Member of B4SA says, “we’re all in this together, and as corporate leaders, we need to do our part to help our economy grow.” To go further, the initiative seeks to make clear that SME suppliers are valuable to the growth of the economy and individual organizations. Adrian Gore, CEO of Discovery Group and Chairperson of the SA SME Fund, says, “I believe entrepreneurs are a powerful force and an integral part of this rebuilding. We need to support them.”

According to Business for South Africa (B4SA), the SA SME Fund, and Business Leadership South Africa (BLSA), “Some companies have used the crisis to extend payment terms and have asked SME suppliers to reduce fees. This is simply not sustainable for smaller businesses.” In banding together, in saying “do the right thing,” with the #PayIn30 campaign, we aren’t going to see as many small business operators, crumble under 90 – 120 day wait periods.

“I think the rationale that we have received in the past for long payment terms is ‘That’s just how the system is. We pay in 90 days.’ Or ‘As an agency, our payment terms are 60 days.’ Or however many days it takes. And I just don’t think these guys understand that as a small business we are reliant on getting paid a full payment before the project is done or right after we deliver the project because we need to service our debt, or we need the cash flow for us to stay afloat as a business to be able to pay our staff members, to be able to pay our independent contractors as well. I just think that people with cash flow don’t seem to understand that smaller businesses struggle to keep cash flow because of long payment terms that other businesses and other industries seem to have. And they don’t account for us as well, being part of those spaces.” – Austin Malema of RTC Studios.

Does this mean that every SME will benefit immediately? Perhaps not. But knowing that big corporations are setting the tone puts creative businesspeople, for instance, in a better negotiating position. #PayIn30 can’t force every organization to opt-in, but it does highlight the discrepancies with previously accepted practices. It gives small businesses a leg up when they state their fee, terms, and conditions to doing business. In short, it levels the playing field; and at the end of the day, when competition is fair, everyone wins. 

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