Accounting Topic – Small Companies – Watch Your Cash Flow and Recievables!
Sometimes I’ve wondered why corporations string out their small business vendors out to dry so often. No, not all, but far too many and during a recession well, it just gets to be really annoying and troubling. In fact, I’ve often asked; “Do MBA Schools Teach Corporate Purchasing Agents How to Take Advantage of Small Business?”
Prior to retirement, I ran a franchising company, and our franchisees would always complain because they often had many corporate customers who paid them extremely slow. There were no worse slow-paying customers than the large corporations, except for maybe the government, yes our franchisees also had lots of government contracts. One thing I noticed, was anytime there was a recession coming on, the Corporation started to hoard their money, and pay their bills very slowly to the small businesses.
They would often make excuses of why they were paying the bill slow, and was usually something about the bureaucracy, and the paperwork, but that’s really unfair to the small business person, who has to pay their labor, and had already paid for that inventory. Not to mention put out the money doing the services or selling the products until they get paid. It puts the small businessman into a cash flow crunch.
When the small businesses are in a cash flow crunch, kind of like they are now during the recovery of this current recession, they are unable to expand their businesses or hire more employees. Right now, large corporations are hoarding cash, and they have massive retained earnings sitting on the sidelines. Due to the uncertainty of the economy these corporations are not spending money, or paying their bills any faster than they did in the recession.
It’s as if the small business community, which provide services and products to corporations have floated all of their cash flow, while the corporations purposely string them out to dry.
What’s worse, if the large corporations with their lobbyists going to Washington DC and putting up barriers to entry for smaller firms to compete with them, as they coax the legislators into making more regulations in each every industry. This is rather unfortunate, especially considering the corporations want to make even more money, and after not paying the small business vendors, they start having everything made in China, and so the solution is very simple;
Corporations should pay their bills on time just like the consumers that buy their services and products. If a large Corporation will cut off the consumer who is 30 days late on their bill, then the Corporation must pay all their bills within 30 days. No excuses fair is fair.
Secondly, we need to reduce regulations for small businesses especially because the small business community is not in the room when the lobbyists and their lawyers are sitting together with congressional staffers writing up bills that are 3000 pages. Bills that the congressmen vote on, and never actually read.
If we want more jobs, we have to reduce regulation, there is no other way, but we need to reduce the regulation for the small businesses. The small business community are the ones that hire 75% of all the people in our country. I’d say that’s a pretty good place to start if we really truly and sincerely want to create jobs. However, I suspect that many of the legislators may be much more concerned with collecting money to run for their next campaign than bringing jobs to small businesses. You can call me cynical if you want, but that’s what I have observed out here in the real world. Please consider all this.
