“If you’re a small-business owner who has a contract with the federal government, we’re going to make sure you get paid a lot faster than you do right now,” Obama said in his address to a joint session of Congress Sept. 8.
Many small businesses are involved in federal contracting, and for some it is their livelihood. One of the most prevalent complaints I have hgeard in talking to Small Business owners across the country is that the government does not pay quickly enough. This has turned off many from pursuing federal business.
Imagine you win a governemnt contract, work for 6 months to complete the work, then wait the 30 days for payment. This is how it generally works, and small businesses are forced to put up their own capital and do not see a return for months. This economy has made that even more risky for small businesses. As you can imagine, a small business waiting to get paid by the government can be a stretch to their finances. Often times payroll and accounts payable are in competition with each other. As helpful as a large federal project can be, the company is forced to dip into savings to finance the labor and materials. So, when 30 days come and go, small businesses are vulnerable.
Another topic Obama addressed was the issue of late payments and he outlined some general ideas on how the government will solve this problem. It is actually pretty normal for the government to pay late, and this is because of the over-complicated invoicing procedures. So, it is music to small businesses ears to hear that this will become automated and web-driven. Many will be sure to follow this closely as Obama unveils his American Jobs Act, and specifically how Small Businesses will get paid faster.