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 /

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