Supply Chain Finance scheme is a pain in the cashflow

Every now and then, you see a proposal and think “there’s no way that will work” – on the 10 Downing Street website, they’re usually found in the ePetitions section, where people come up with ideas like mandatory crash helmets for pedestrians and so on.

Today though, one of those proposals was to be found in the press releases on Number10.gov, where prime minister David Cameron outlined the ludicrous basis behind the new Supply Chain Finance scheme.

Imagine the following situation as an example:

  1. You’re a self-employed individual, sole trader, family firm or starter business struggling to make ends meet in a competitive market and a stagnant economy.
  2. Your client is a FTSE100 firm with a turnover in the millions or billions of pounds, with seemingly limitless resources at their disposal.

Now, what can they do to help your cashflow look a little healthier? Do they:

  1. Pay you immediately when you carry out work for them, as a few hundreds or thousands of pounds are almost irrelevant in their finances, but could mean survival for your company?
  2. Promise to pay you at a later date, so that you can take that promise to a bank and take out the business equivalent of a payday loan – complete with interest – until the invoice clears?

The government, bizarrely, has decided on the second option – and that’s what the Supply Chain Finance scheme is.

A ‘win-win’ situation

Announcing the scheme this morning, Mr Cameron said the following:

“This government is determined to back all those businesses who aspire to get ahead and take on more people.

“In the current climate, viable businesses can struggle to get the finance they need to grow – this scheme will not only help them secure finance and support cashflow, but will help secure supply chains for some of our biggest companies and protect thousands of jobs.

“It can be a win-win, with large companies and small suppliers both benefiting from this innovative scheme.”

How suppliers can ‘benefit’ from paying interest on money that is rightfully theirs, but is being withheld by big brands for no specific reason, is open to some interpretation – but as the Popeye character J Wellington Wimpy always used to say, “I’ll gladly pay you Tuesday for a hamburger today.”

Supporters

Reading down the list of companies that have already agreed to the SCF commitment, it’s hard to see why they should need longer to settle their debts – they include:

  • AB Foods
  • ASDA
  • Atos
  • Babcock International
  • BAE Systems
  • Balfour Beatty
  • Boeing
  • BP
  • British Airways
  • BT
  • Capgemini
  • Carillion
  • Centrica
  • Dell
  • Diageo
  • EDF Energy
  • Finmeccanica
  • General Dynamics UK
  • GKN
  • GSK
  • Home Retail Group
  • HP
  • IBM
  • J Sainsbury
  • Jaguar Land Rover
  • Kingfisher
  • Lockheed Martin UK
  • Marks & Spencer
  • MBDA
  • O2
  • Rolls-Royce
  • Serco
  • Siemens
  • Statoil
  • Tata Steel in Europe
  • Tesco
  • Thales
  • Vodafone

It’s a veritable who’s-who of the FTSE100 – so you could be forgiven for grinding your teeth just a little as you pay the interest on their outstanding invoices while your money sits in their account earning them interest.

Restoring the balance

If this whole idea doesn’t seem fair – well, it isn’t really. You deserve to be paid for the work you do, and if anything big businesses with massive revenues should pay more quickly, simply because they have the funds available.

The Supply Chain Finance scheme flies in the face of all the work recently done to promote prompt payments, and instead seems to say “it’s OK to take your time – they can borrow the money from someone else”.

Where payment terms were agreed in advance, you don’t have to sit and wait for your customers to decide to pay you, however big their company might be.

Chase overdue payments and you can add statutory interest to the amount you’re owed; you shouldn’t have to pay interest to accommodate clients who are withholding payment.

Alternatively, outsource your ongoing credit control processes to the Cash Protection Agency, and we can make sure invoices are received and handled correctly, so there’s no chance of a payment simply getting lost among all the paperwork that a large business receives on a daily basis.

Remember, when you are owed money, you have the control over the situation and your customer must ultimately pay what they owe you – don’t be afraid to fight for that right, with us on your side.

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