☛ Want the latest procurement and supply chain news delivered straight to your inbox? Sign up for the Supply Management Daily
23 October 2012 | Adam Leach
Prime minister David Cameron will today urge leading UK businesses to help improve cash flow in their supply chain with a new finance scheme that could see £20 billion in funding released more quickly.
He will attend a roundtable event in London to try to convince major players in the UK economy to follow in the footsteps of Vodafone and Rolls-Royce and help improve suppliers’ access to finance. Through its Supply Chain Finance Scheme, companies agree to notify a bank as soon as an invoice is approved, giving suppliers immediate access to a low-interest loan from the bank for the amount to be received.
Cameron said: “This government is determined to back all those businesses that 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 cash flow, but will help secure supply chains for some of our biggest companies and protect thousands of jobs.”
According to the government, the scheme will deliver a wide range of benefits to suppliers of participating companies. These include cheap funding based on the credit quality of their customers and efficiency savings generated by a reduction in the cost financing. Crucially, the scheme will see 100 per cent of the invoice value made available to suppliers in advance of it actually being paid. Currently, invoice-financing schemes are available, but only pay between 70-90 per cent of the value to suppliers.
John Walker, national chairman of the Federation of Small Businesses, said: “The new Supply Chain Finance Scheme could help smaller firms in two key areas – improving their working capital and tackling issues of late payments. Nearly three quarters of small businesses report that they have been paid late in the past year, placing a huge strain on cash flow and meaning they struggle to realise ambitions to grow.”
CIPS CEO David Noble, said: “Many businesses recognise the importance of their supply chain and therefore invest time and energy into developing those relationships. They benefit by being regarded as a ‘preferred customer’ by their suppliers and in the process, secure a competitive advantage. Those that don’t value their supply chain in this way will undoubtedly find it difficult to diversify their supply base when they need to.”