Usually, I write about interesting trends and technologies but today my focus should have a lot wider appeal. I have a solution for our economic woes, and it doesn’t involve big taxpayer bailouts of fatcats, misguided tax cuts, or any really big effort to overhaul our financial systems requiring legislation too thick to comprehend by your average Congressperson. It is something that can appeal to Democrats and Republicans, Tea Partiers and Tree Huggers alike.
In fact, it is so simple that you can get it in a sound bite. Here goes:
Let’s ask all businesses to get rid of their payables, and go to net 15 days. Get rid of lengthy payment cycles, and we can stimulate the economy in a matter of a month or two.
When was the last time your company paid their bills quickly? I am thinking somewhere around 2007. We have turned our creditors into lending institutions, unregulated, unwilling and unwary ones at that.
One of the first things that In-Bev did when they took over Anheuser-Busch here in St. Louis back in 2008 was to institute 120-day payment cycles on all bills. They basically turned themselves into the In-Bev Bank, keeping their suppliers’ cash for an extra quarter. It was a neat accounting trick, but it was a dirty one. In one move, they took millions of dollars out of the economy and put it in their new “bank.” That money has disappeared forever. Until now.
By accelerating payment, we move money back into the economy at a time when it is needed. We eliminate our receivables and we can spend more to expand our businesses, or at least make payroll, or build more widgets and deliver more services.
We don’t have to rejigger the already too-complex tax code. We don’t need lots of lobbyists running around telling us what to think. There are no Senators from Midwestern states to hold us hostage for their pet programs or businesses. We don’t need new regulations to prohibit credit swaps and new securities that ten people on Wall Street can only understand. We just need the force of will and determination to make us all a great place to do business once again.
As someone who runs a small business, it hit me that I have no payables to speak of. Of course, receivables are another matter entirely and in the past year I have seen the average payment times get longer and longer, as my clients hold on to their cash. I pay my bills promptly, not that I have much choice when the rent is due or my cable bill arrives. My biggest payable each month for my business is my credit card, and I choose to pay it off when it arrives. Call me a dinosaur, but that’s the way I want to do business. I just wish others would follow.
Call this my hopey-changey kind of stimulus. It might just work.