Published
May 22, 2023
There are harsh realities for small business owners who aren’t paid quickly. I have witnessed a company started by a friend go south because clients would not pay invoices on time—some more than 100 days delinquent with their payments.
Those overdue invoices can cripple a small business, and, in the worst-case scenario, can force a small business to shut down. Unfortunately, that scenario is far too common for small business owners.
I wish this wasn’t the case, but if you ask any group of small businesses about whether their clients pay on time, there is always an example of late payments. But here at the U.S. Chamber of Commerce we are trying to change that reality.
That’s why the U.S. Chamber launched the Prompt Pay Pledge to ask large companies to pay small business suppliers and vendors faster.
Small businesses make up roughly half of America’s GDP, provide slightly less than half of the private sector jobs, and are responsible for two-thirds of net new job creation. If the small business economic engine sputters, so does the national economy.
I’m hopeful that our initiative will make a dent in this concerning phenomenon that gets little national attention.
How the Prompt Pay Pledge helps small business suppliers
Signing the Prompt Pay Pledge is simple and can be done in minutes on the U.S. Chamber website. When a business signs the pledge, it commits to:
- Providing expedited or quicker payment for invoices and/or working to find a financing solution to help small suppliers access working capital at a lower cost
- Clearly communicating payment policies and terms to small business suppliers and vendors
When a company signs the pledge, it will be recognized on the U.S. Chamber website, receive a communications toolkit to help spread the word about prompt pay, and be among the first to learn about new resources and events dedicated to the prompt pay.
Our Prompt Pay Pledge website currently offers a variety of suggestions for how large businesses can help support small businesses, including speeding up payment processing, helping small businesses adapt technology, using small business suppliers in their operations and more.
There also are several resources for small businesses that focus on customer payment terms and recommendations, which are sorely needed to keep small businesses healthy.
When a small business supplier isn’t paid for two or three months after invoicing, the small business owner must finance the gap in payment themselves. The combination of higher costs due to inflation and tightening credit due to interest rate hikes can make it impossible for a small business to cover that payment gap themselves or to take advantage of bridge financing.
Inflation has ranked as small businesses’ top concern for five consecutive quarters, according to the latest MetLife and U.S. Chamber of Commerce Small Business Index.
Rising prices puts additional pressure on cash flow for small businesses. Getting paid quicker is one way to relieve some of that pressure.
Prompt pay can also have additional benefits for companies large and small. We have heard from many large businesses that they are looking for good suppliers to diversify their supply chains. It is our hope that an outcome of our initiative will be that some fantastic small businesses will actively pursue business with the corporations that make the Prompt Pay Pledge commitment.
The Prompt Pay Pledge is just one piece of the work the Chamber does every day to help all our members — businesses both large and small, in every sector and in every state across the country — continue to thrive.
We are always looking for ways to improve the ecosystem that exists between large and small businesses. I’m really encouraged by the support and partnership we already have on this initiative. And we’re just getting started.
Note: A version of this article was first published by Vistage, an executive coaching and peer advisory organization and partner on the launch of the U.S. Chamber’s Prompt Pay Pledge. Read Vistage’s article here.
About the authors
Thomas M. Sullivan
Thomas M. Sullivan is vice president of small business policy at the U.S. Chamber of Commerce. Working with chambers of commerce and the U.S. Chamber’s nationwide network, Sullivan harnesses the views of small businesses and translates that grassroots power into federal policies that bolster free enterprise and reward entrepreneurship. He runs the U.S.
