Small businesses will be forced to close - Hon Julian Fraser RA
He was writing on his Facebook page yesterday May 23, 2016. “For small businesses cash flow is king as it enables companies to purchase inventory and cover payroll and operational expenses,” he said.
“However, many of our British Virgin Islands based independent companies are experiencing weak cash flows due to an extended accounts receivable cycle...and sadly enough, Government is the main culprit,” he said.
He added that the problem is made worse when one factors in the 7 and a half percent that will now go towards National Health Insurance.
According to Honourable Fraser, the delays in Government payment is causing a ripple effect among businesses and small suppliers.
Honourable Fraser added that since before the elections of June 2015, Small Businesses, contractors, and individuals have been complaining about Government's insensitivity to their plight of not being paid monies owed, and despite it being a campaign issue Government remained oblivious to their demise.
“Last month in the House of Assembly the Opposition rightfully expressed distrust with the government when they moved a Motion to borrowing $25 million from CIBC First Caribbean Bank, ostensibly as a line of credit to pay off these very small businesses for services rendered that has been owed for months, and promised to keep their accounts payables current. Evidently, the Opposition was right, for businesses are still not being paid and are complaining,” he said.
He pointed out that since many of the suppliers to government are small businesses, they may carry an additional cash burden due to slim availability of bank loans or lines of credit.
“Additionally, small businesses have little bargaining power when dealing with government and are forced to accept more lengthy terms. This can have a devastating impact on suppliers that are already strapped for cash, seeing their costs rise, and squeezing funds that could otherwise be spent on growth or hiring,” he said in his Facebook post
Honourable Fraser said that employers have told him that they are holding on to their employees out of compassion, knowing that they have responsibilities and are in need. “But if government continues to exhibit this lack of regard without cease, they will be left without choice but to let their employees go, or worse, shut down their business.”
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13 Responses to “Small businesses will be forced to close - Hon Julian Fraser RA”
Consequently, government should set paying vendors within 30 days of receiving an invoice as a standard opererating procedure(SOP) and a priority. Small business owners got households to run, i.e., children to feed, housed and clothed ……etc so government must demonstrate some compassion and sensitivity to their plight. By the way what was the $25M line of credit for again? What change from previous budget years that a line of credit is now needed? Did the payment cycle from financial services change (June and November)?
Moreover, the complaints from small businesses about late payments from government for goods or services provided exposed another issue. It shows that government is a big player like other governments in small locales in the economy. Residents depend heavily on government for direct and indirect employment. This is unsustainable. Consequently, the economy must grow and be diversified. The economic base is too narrow. To borrow a line from E. Leonard, the BVI small size comes with some inherent disadvantages and vulnerabilities. One of these is the narrowness of the economic base and the extent of government involvement in the economy.