Saltare Blog: Injecting cash into local economies through early payments

Cashflow is critical for any business to succeed, to pay staff, fuel innovation and fund expansion. In local government, paying suppliers on time – or even ahead of time – supports local communities and local businesses. Paying late, however, has the opposite effect.

A recent report from Locality found that for every £1 of public money spent with local businesses, £2.50 was created for the local economy, thereby stimulating growth and prosperity. But this is only true if suppliers are paid on time, and bureaucracy can sometimes get in the way.

Local authorities deal with those contracted to them. Decisions – and indeed payment – travel down through each agency and contractual agreement. This is both positive, since it encourages greater ownership of the supplier relationship, and negative, because if one agency or body pays late, or not at all, the effects are felt at each level of the supply chain.

In the current economic climate, this situation, on top of the increasing cost of doing business and rising interest rates, means that local businesses often struggle with their cashflow. Their payment can be held up through no fault of their own, and this in turn means they don’t have the cash to recirculate into the economy through their own, sub-contracted local work. Put simply, there are no winners, and plenty of losers.

But what if local authorities were not only encouraged to pay on time, but even pay early? What effect would that have on local businesses, and the local community?

The Case for Early Payments

The early release of cash into the hands of local, contracted businesses delivers five principal benefits:

• Greater capital for expansion, growth, and innovation – allowing businesses to grow whilst spending more money within the local communities
• Increased employment opportunities – as teams and businesses grow, so do employment rates which in turn increases local spending
• Community development – as businesses spend more locally, councils and governments gain more revenue through taxes, allowing for new community programmes and developments
• Improved community relationships – as businesses continue to flourish, community leaders are able to strengthen relationships and partnerships through early payments delivering increased trust
• Improved mental health for business owners and their staff – confidence in cashflow helps reduce anxiety amongst staff members as salaries and career prospects become more secure.

Not only do early payments help local government to improve communities, they also align very closely with the Whitehall Government’s National Procurement Strategy (NPS), allowing local authorities (LA’s) to boost their social value scores simultaneously as champions of local business.

Technology as a tool

New platforms now available can seamlessly integrate with existing systems used by councils and by leaning on existing Government frameworks (e.g the Crown Commercial Services G-Cloud 13 framework) procurement officers can be confident that the software they’re looking to implement is fully approved and accredited for use. These new platforms give finance teams even greater flexibility in managing payments and enhancing supply chain relationships, reducing their own workload, and their own levels of stress. This is especially important as council leaders seeks to evidence social value within their Environmental, Social and Governance (ESG) policies.

In short, local authorities are under significant pressure to meet stringent new government policies as part of the enhanced ESG and levelling up agendas. By implementing new early payment policies, LA’s help improve community relationships through the direct injection of cash into the businesses and projects that need them most.

An example of a new platform that aims to address the challenges outlined is CCN Partner, Saltare. 

To find out more please contact Saltare CEO Ant Persse at apersse@saltare.io.

Philip King

Non-Executive Director at Saltare and former Interim Small Business Commissioner at the Department of Business, Enterprise, and Industrial Strategy