Does getting paid 15 days earlier make a difference to small suppliers? According to research published by MIT Sloan School of Management and The Harvard Business School, the answer is a resounding YES!
The data offers proof that paying small businesses faster not only has a direct effect on their cash flow, but also stimulates hiring and overall employment of that small business. According to the researchers, accelerating payment by just 15 days is correlated with quantifiable Small and Medium Enterprises (SME) job growth.
The study examined the impact of ´QuickPay` rules- the guidelines of which accelerated payment to a subset of SME government contractors in the United States, reducing the payment period by 15 days and leading to an annual contract value of $ 64 billion.
According to the authors, each accelerated dollar of payment to an SME led to a 10-cent increase in payroll. Two-thirds of this increase was attributed to new hires, while the remaining one-third the result of increased earnings of pre-existing employees.
“We are very excited about this research because this is the first time an acceleration in cash collection has been shown to have an effect on hiring in the all-important sector of small businesses,” says Assistant Professor of Finance at the Sloan School, Jean -Noel Barrot. “This suggests that increasing the speed of payment to small businesses can effectively stimulate job creation.”
This study proves that just a few days can have a serious impact on SMEs while waiting for invoice payment.
With Finvex, small businesses can be ´one click away´ from accessing immediate payment . Instead of waiting to get paid, SMEs can rather invest money back into their own businesses and go on to grow and employ!
If you are interested in learning more about account payable financing and how it can benefit your suppliers, please contact us.