Thousands of businesses are under extreme pressure right now. Many might not survive the coming weeks. That’s not fear mongering, it’s the stark reality of the current economic situation as the COVID-19 pandemic spreads around the world.
One fifth of small- and medium-sized enterprises (SMEs) in the UK are at risk of collapse, according to research by the Corporate Finance Network. The Canadian Federation of Independent Business paints another bleak picture: a third of their members may shutter in the coming weeks. In the US, there are fears that 50 percent of SMEs could fail because of social distancing measures.
These failures will reverberate through supply chains—affecting those at the top as much as those at the bottom. A large enterprise may find themselves without key suppliers. For example, they could lose a small manufacturer that produces niche widgets vital to their product that they weren’t even aware of before the pandemic. Or, they may find their sales decline as disposable income levels collapse because millions have lost their jobs. The problems they face will be both micro and macro.
What’s clear in these uncertain times is that we’re all in this together. Businesses must do their bit to support each other—not just to navigate the current situation but also to put themselves in a position to thrive when it’s over.
How buyers can help
All over, we’re seeing buyers stepping up to the mark. In the UK, supermarket chain Morrisons has pledged to pay its suppliers immediately. High street brand, H&M, has committed to paying for outstanding orders. In the U.S, Levi’s has also pledged to honour its existing orders and donated $3 million to support employees, community partners and supply chain workers.
Not every company can take similar measures, but most buyers can still ease the burden on sellers by resetting the way they engage and working together.
Here are three ways every enterprise can do it’s part:
- Engage your sellers digitally
Establishing a digital relationship with your sellers must be a top priority for your business right now. As we explored in a recent post, there are billions of unpaid invoices stacking up in empty offices right now. Unless accounts payable can access these invoices they will continue to go unpaid, seriously impacting sellers that are feeling cash flow pressure.
You can solve this today by reminding your sellers of how best to invoice your company. It might seem like a rudimentary exercise, but remember, you’re not their only customer, and what you require may well differ from others. So remind your sellers about your e-invoicing solution and send them a link to activate their account.
Don’t have a system in place? Fear not, Tradeshift has you covered. We’re offering fast track e-invoicing for your company and its sellers. Get in touch to find out more.
2. Communicate and collaborate with your sellers
Communicating with your sellers will go a long way to relieving the pressure they’re feeling. It will also help mitigate the risk of any supply chain disruption affecting your businesses.
You might start by explaining your business’ current situation and outlining what they can expect from you in the coming days and weeks. It’s important to be transparent if your business is planning to reduce, increase, or postpone future orders. This is information your sellers need to know and it’ll help them plan their next steps.
Your sellers will also be desperate to know when they’ll get paid for the products they’ve delivered already. So use that digital connection to provide increased transparency into your processes. Let your sellers know the status of their outstanding invoices, tell them if there are issues, and state the day they’ll get paid—and stick to it.
3. Pay your sellers as promptly as you can
Many of your sellers will be desperate for cash. If you can give them cash today, they’ll take it. And there are ways you can do this without harming your own cash flow when you're digitally connected. Take the time to explore what supplier financing options exist and which will deliver the most value to you and your seller base right now and in the future.
The actions businesses take today will define their future
The sooner this crisis passes, the better. But that doesn’t look likely, at least in the short-term. And until that happens, businesses must work to support each other.
It remains to be seen how many companies will do so, however. The truth is, many businesses focus inwardly in times of crisis. They see their sellers as a cost base, and it’s one of the first places they turn to cut costs during a downturn.
Doing so might provide a short-term benefit, but at what cost? Buyers need their sellers just as much as sellers need their buyers. There is no us and them. We’re all in this together.
The actions of your business today matters. Not just short-term, but long-term as well. Because the current period of disruption will pass, and when it does, those companies that have done all they can to keep their supply chains intact—and even worked to make them leaner, more agile and better capitalized—will be in pole position.
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