…Extended invoice terms are crushing SMEs and stifling economic growth
…It’s time for government and business associations to act
In boardrooms and procurement departments across the world, a harmful and exploitative practice continues to gain ground—offering 60- to 90-day payment terms to small and medium enterprises (SMEs) for services rendered and goods delivered. What may appear to be a standard business procedure is, in truth, a slow, systemic strangulation of small businesses.
For many SMEs, these payment terms translate into deferred salaries, mounting debts, broken supply chains, and eventual closure. Yet, this has been normalized, even institutionalized, by some of the world’s most profitable corporations.
Let’s be clear: if it is illegal and unethical to owe employees for three months, then it is equally unconscionable to delay payment to contractors and vendors—many of whom also employ staff, pay taxes, and support entire communities.
Unfair Terms, Real Consequences
The logic behind extended payment terms is simple—preserve the cash flow of the larger company by transferring liquidity pressure to the smaller party. But the consequences are devastating.
Payrolls are missed, leading to staff attrition and hardship.
Tax and pension obligations go unmet, attracting penalties.
SMEs become riskier borrowers, losing access to critical credit lines.
The ripple effect spreads, destabilizing entire value chains.
This is not just bad practice; it is bad economics. In most developing countries, SMEs contribute up to 80% of employment and a significant share of GDP. To throttle this sector is to undermine the foundation of the economy itself.
A Form of Economic Exploitation
The practice bears uncomfortable resemblance to a modern form of financial servitude. The SME delivers value now but must wait 90 days—sometimes more—for payment. The larger company, meanwhile, records the benefit immediately, but defers the cost. This is an imbalance of power dressed up as contractual agreement.
It is disingenuous for large firms to tout their corporate responsibility credentials, while using payment delays as a cash management tool. A company that prides itself on ESG compliance should not perpetuate a culture of “pay when convenient” at the expense of its smallest partners.
A Call for Urgent Reform
Governments, regulatory agencies, and business chambers must rise to this challenge. It is time to move from advocacy to enforcement.
Policy solutions should include:
Legislation mandating a maximum 30-day payment window for SMEs.
Automatic penalties and interest on delayed payments.
Public disclosure of payment performance by large corporations.
Empowerment of trade associations to escalate non-compliance and advocate for members.
The UK’s Prompt Payment Code and similar initiatives in Europe are steps in the right direction, but enforcement has been weak, and compliance largely voluntary. In Africa, Asia, and Latin America, the situation is worse, with SMEs routinely waiting over 120 days for payment.
Why This Matters Now
In a post-pandemic economy marked by inflation, currency volatility, and rising input costs, SMEs cannot afford to bankroll the operations of larger entities. Timely payment is not a favour—it is a contractual and ethical obligation.
If governments truly support small business, and if big corporations are sincere in their social responsibility pledges, then fair payment practices must become a non-negotiable standard.
Conclusion: Pay SMEs Promptly—Or Pay the Price Later
The continued abuse of payment terms is a threat to innovation, jobs, and economic resilience. It is a silent killer of small businesses, hiding behind the bureaucracy of procurement systems.
It is time to confront this head-on. Delayed payments are not just a financial issue—they are a moral and economic crisis.
Let this be the turning point. Let us champion a new business culture where contracts are honoured, obligations are met on time, and the lifeblood of enterprise—cash flow—is respected.
Anything less is exploitation.
Dr Emmanuel Okoroafor is a business executive and entrepreneur with over three decades of experience in human capital management, oil & gas, and African trade development. He is the CEO of Hobark Consultants Management Services Ltd and founder of MEPON Ltd.
