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White House Nudges Large Firms to Speed Up Payments to Small Vendors

Small to mid-sized enterprises (SMEs) are getting some help on an critical issue from a pivotal source: the White House. President Obama is coming to the aid of the legions of small business owners who have become frustrated over the last several years by the increasing tendency of large and even blue-chip corporations to slow down payments to their suppliers.

Obama got pledges from Apple, Coca-Cola, AT&T, Johnson & Johnson and several other big companies that promised to speed payments to firms down their supply chains in a move that should boost cash flows and increase investment by those smaller businesses.

“SupplierPay” is a voluntary program in which the big firms committed either to paying small suppliers faster or to helping them get access to lower-cost capital. The program set a goal of having small-business contractors get paid within 15 days of delivering a product or service so that their cash flow is strengthened, they have less need to borrow, and will be more inclined to add employment.

This strategy could offer mid-sized firms preferred status among certain vendors, turning a vendor into a high-value partner and allowing them access to everything from free upgrades to pivotal advice, extra training and better service.

Paying small companies slowly has become increasingly common. As the entire U.S. economy deals with patchy growth, sales and payments get stretched out. The zero-interest environment actually has encouraged some large corporations to extend payments to as long as 120 days under the rationale that their smaller suppliers aren’t hurt much financially by having to augment cash flow with credit.

This problem has become especially acute—or at least high-profile—in the marketing business where advertising and public-relations agencies have the audiences and skill sets to be heard on the issue. Procter & Gamble and a number of America’s other biggest advertisers have nudged payments back to 120 days.

About Dale Buss

Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.