Conventional wisdom dictates that stretching trade credit is the cheapest form of working capital financing for Buyers. In practice this approach is seldom without a cost and is frequently counter productive. Disputes are exacerbated by underlying tensions resulting from delayed settlement. Suppliers frequently favour the best payers over their more recalcitrant debtors and always exact a price in some manner or other.
Modern 'just in time' and sophisticated logistic management systems are built on communication, cooperation, and openness. The physical supply chain is regarded as a partnership between enlightened Buyers and Suppliers.
Tardy payment, whether by design or inefficiency, is not congruent with these breakthrough strategies in physical supply chain management where inefficiencies have been ruthlessly squeezed from virtually every aspect of physical logistics management.
And yet paradoxically payment practices have not been subject to the same rigorous examination.
A late payment culture has become endemic in the United Kingdom which Government has introduced legal redress to deter. Indeed technology vendors are promoting Electronic Invoicing Presentation and Payment systems to remove bureaucratic inefficiency and delay, encouraging Buyers to take advantage of early settlement discounts.
We believe the driver to reduce late payment lies not in law, technology, or name and shame exposure. It will come from demonstrating commercial benefit to all parties in a supply chain. If Buyers benefit financially from rapid settlement they are likely to embrace it; always provided they have the cash to do so.
By making available the cash and bringing the timing of delivery and the timing of settlement closer, we create that commercial benefit opportunity for Buyer and Supplier.
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