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Why your competitors might be paying suppliers early

For the last 10 years the business case for supply chain finance has been simple.

Take one FTSE 100 company, extend supplier payment terms to 90 days, add cheap supply chain finance to soften the blow for suppliers, and bingo: cash increases by £50million overnight. Whether or not suppliers actually use the programme is immaterial – the buyer has achieved their objective.

With alternative finance offering smaller, flexible payment programmes to dynamic UK companies, exciting new uses for supply chain finance are emerging. When all the major retailers are stretching their payment terms, fast-growing retail start-ups are using supplier finance to fund short payment terms and securing an advantage through settlement discounts from global brands that most of their competitors wouldn’t believe.

Switching supply contracts for raw materials from middlemen to the production source can yield significant savings. Usually this has a cash impact, with up-front payments being required. However, when combined with supply chain finance procurement savings can be achieved without upsetting finance.

Finding quality artisan suppliers gives larger companies a unique offering, but how do you make sure that they can grow with you? Successful companies are partnering with supply chain finance providers to ensure that their key suppliers have the funding they need.

There are those who would say that paying suppliers on short terms is simply the right thing to do, but fast growing companies are not sitting on a cash pile, they are investing for growth and this benefits the whole supply chain. Supplier finance programmes support growing supply chains.

Mark Coxhead is MD at Woodsford Tradebridge
woodsfordtradebridge.com

 

http://business-reporter.co.uk/2014/07/why-your-competitors-might-be-paying-suppliers-early/

By : admin /August 23, 2014 /Working Capital /0 Comment / Read More

Supply chain finance becoming increasingly important to banks

Supply chain finance is becoming more important to banks and trade finance is becoming increasingly available, according to a survey.

The ICC Global Trade and Finance Survey 2014 studied data from 298 banks in 127 countries, and 68 per cent cited a rise in the availability of trade finance in 2013, although most of these said it was a minor change.

80 per cent said that trade finance pricing has either fallen or stayed the same.

However, concerns over the cost and complexity of regulations have led nearly two in five banks to close correspondent account relationships.

This particularly affected SMEs, which sometimes lack the resources to ensure compliance, meaning banks cannot complete the required processes.

Chair of the ICC Banking Commission Kah Chye Tan said: “This study has reached a higher level of participation than ever before, and its broad geographical reach enhances the richness of the data collected.

“As such, we trust that the impact of the results on trade finance regulation, and the subsequent change it triggers, will be the most significant to date.”

For more on the report, see the ICC website.

By : admin /August 19, 2014 /Working Capital /0 Comment / Read More

DIAGEO Sustainability & Responsibility Report 2013. Supplier finance – supporting small and medium‑sized businesses

Suppliers are vital to our business, and cash flow is as important to them as it is to us, especially in tougher economic times. We’ve launched a supplier financing programme designed to support the businesses that support us.

We rely on a wide network of small and medium‑sized enterprises (SME) to supply us with the raw materials, goods and services we need to make great brands. We know that for many of them, trading with Diageo is an important part of their business. Our pilot SME supplier finance programme, launched in 2012, is designed to share the advantages of our strong credit rating and good banking relationships by enabling suppliers in the United Kingdom who wish to benefit from early payment to do so on favourable terms – improving their cash flow, however difficult the times.

Suppliers who sign up to the scheme can receive early payment of their Diageo invoices from Santander, our banking partners, at a reduced rate. The only paperwork required from suppliers is a letter saying they want to participate, and the scheme allows payments to be advanced by as much as 50 days from our normal 60‑ day payment terms. Rates are significantly lower than normal banking arrangements – so currently for the cost of £3, a supplier could advance payment of a £1,000 invoice by 50 days.

The scheme has proved popular with suppliers, with 122 businesses drawing down £109.5 million so far.

‘First two payments have gone through without a hitch – so it all looks good. Schemes like this are always good for a small business like ours where our main focus is on cash flow – so thanks again!’ Audrey Paterson, Admin manager, John A. Smith & Son (Building Contractors) Ltd, based in North Berwick, East Lothian, Scotland

http://srreport2013.diageoreports.com

1. Cost is dependent on the London Interbank Offered Rate (LIBOR) and could vary.

By : admin /August 19, 2014 /Working Capital /0 Comment / Read More

SupplierPay: What Does it Mean for the American Economy?

When President Obama announced the SupplierPay initiative in July, the news was met with little fanfare. The White House put out a statement—which media outlets largely repurposed without taking a closer look at the potential impact of the pledge. The news cycle soldiered on.

It’s understandable: “supply chain” and “invoices” aren’t the sexiest of topics. And while it’d be easy to dismiss the initiative, which encourages large corporations to pay their small business suppliers earlier, as a trivial public relations move—it’d also be wrong.

The idea of paying suppliers faster is actually not a new one. In 1999, the U.S. Government enacted the “Prompt Payment” rule, mandating that the Executive branch of government pay its suppliers within a certain period of time. In 2011, Obama launched the Quick Pay initiative, which, “requires federal agencies to speed up payments to small business contractors, with the goal of paying within 15 days,” according to the White House. This was another step in the right direction, but it didn’t do much for businesses that don’t sell to the government.

Then came SupplierPay this month, which is modeled after Quick Pay. President Obama met behind closed doors on Friday with executives from some of America’s largest corporations, including Apple, Toyota, and CocaCola, to encourage them to pay suppliers earlier.

>>> Click on the PDF icon here below to read the full article

By : admin /August 19, 2014 /Working Capital /0 Comment / Read More

President Obama Announces New Partnership with the Private Sector to Strengthen America’s Small Businesses; Renews the Federal Government’s QuickPay Initiative

As a part of his Year of Action, the President is using the power of his pen and phone wherever he can on behalf of the American people to create jobs and help hardworking Americans get ahead. Today, the President will announce the creation of SupplierPay, a new partnership with the private sector to strengthen small businesses by increasing their working capital, so they can grow their businesses and hire more workers.

To launch SupplierPay, the President is bringing together 26 companies – both large and small – that have committed to the initiative. For the larger companies, joining SupplierPay demonstrates a recognition that a healthy supply chain is good for business. For the small business suppliers, benefiting from SupplierPay means having more capital to invest in new opportunities, new equipment, and new hiring.

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By : admin /August 19, 2014 /Working Capital /0 Comment / Read More

European firms could improve working capital by almost €900 billion, research finds

An increasing number of businesses are making use of supply chain financing (SCF) which is having a “positive effect on the overall health of supply chains”. These comments from Jonas Schoefer, a director at working capital specialist REL, follow research that showed an increased focus on working capital as costs and debt start to decrease and cash on hand and free cash flow increase.

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By : admin /August 18, 2014 /Working Capital /0 Comment / Read More

Unilever Moves Supply Chain Finance to Global Shared Services

Global fast moving consumer goods (FMCG) giant Unilever is planning a number of operational changes this year, which it announced at its annual meeting last December. These include reducing the number of products and improving working capital management, with a goal of achieving “at least €500 million in savings by mid-2014”.

The goal is to increase profit margins by focusing on the best-performing products and increasing operational efficiency.

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By : admin /August 18, 2014 /Working Capital /0 Comment / Read More

Weekly Export Risk Outlook from Euler Hermes Economic Research

 

Mexico and the energy sector opening to private and foreign investment, Hungary’s moderate economic recovery, Tunisia transition update and Japan’s 17th month deficit.

Major events impacting world trade this week: – Eurozone: Closer to recovery, but improvement is slow – Turkey: Downside risks remain on the agenda – Ukraine: Bail-out by Russia provides short-term relief…

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By : admin /December 23, 2013 /Working Capital /0 Comment / Read More

Risks are back on the radar in emerging countries: political instability, increasing protectionism, credit bubbles

Despite resilient growth, estimated at 5.1% in 2013, and improved sovereign and external fundamentals, emerging country risks have not disappeared altogether, but have changed form. Three major risks now weigh on emerging markets. Politically, tensions have sharpened, illustrated by protests in North Africa and the Middle East, and now also in Russia and India. Economically, we are seeing a rise in protectionist measures. Financially, excessive growth in bank loans to the private sector in a number of emerging economies is stoking fears of a credit bubble, in Asia in particular.

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By : admin /December 22, 2013 /Working Capital /0 Comment / Read More