February 03, 2009, 10:33 AM — It used to be that everyone loved to have government clients. While private businesses may come and go, you could always count on a government agency to stay in business and to pay their bills on time. Is that still true? Not so much. The State of California's significant budget crisis has started delaying payments to service providers.
The State Controller has initiated a "30 extra days to pay" policy, which adds an extra 30 days onto existing terms--which means there are going to be lots of vendors and service providers that won't get paid for 60 days. And even then, it's not a sure bet that the check will arrive on time. The delays are already starting to affect businesses throughout the state, along with everyone else that gets a piece of the state's money. California's shortage of money will no doubt have a ripple effect on providers, especially those who derive a large percentage of their revenue from the state. Small companies may not be able to get financing from their distributors, and may not be able to get credit from the bank to carry them through the interim--and so it's likely that this is going to cause some providers to cut back, lay off their own staff, or even go out of business completely.