Use of supply chain finance doubles

The number of suppliers taking monthly early payments using supply chain finance (SCF) services has doubled since 2018, according to research. 

Two-fifths (38%) of companies used SCF tools to ensure early payments every month in 2021, up from 19% in 2018, according to research by technology firm Taulia.

SCF schemes allow a bank or financial institution to pay a supplier’s invoice early for a fee, and then buyers must pay the SCF provider the full invoice on the payment due date.

The report, which surveyed almost 80,000 companies, found such technologies have meant “suppliers are becoming more empowered when it comes to early payments”.

It continued: “Looking to the future, we foresee further improvement in supply chain health as more businesses make use of early payments.”

The report said the number of companies interested in using SCF increased from 15% in 2018, to 22% in 2022. 

It found 49% of companies using SCF said they did so to ease cash flow gaps, while 27% used it for the predictability of payments, and 21% used it for working capital needs.

The report said the increase in suppliers using SCF instruments was due to suppliers being more “educated” about financing options, and being aware there are more options available to them than traditional bank loans and overdrafts.

The report said this was “not a one-way street” and increasing numbers of buyers were considering SCF tools to pay suppliers. 

Taulia said there was a “clear progression” towards better behaviour from buyers, with late payments falling from 45% in 2018 to 36% in 2022. 

Cedric Bru, CEO of Taulia, said: “The financial health of suppliers is paramount to building robust supply chains. These results speak for themselves when it comes to showing the progress being made around ensuring that suppliers get paid as they desire - early or on-time.

“This year has seen significant disruption to supply chains due to a wide range of external factors, but adequate financing shouldn’t be a barrier. 

“By working together, those at every point along the supply chain can support the growth of their own business and that of others by offering choice, flexibility, and consistency when it comes to getting paid. 

“We hope to see continued progress with this for every size of business and know that by providing the best technology, we can actively help to make these choices available to as many businesses as possible.”

Recent research by the Federation of Small Businesses found 440,000 small businesses in the UK were at risk due to late payments.

It found almost one in three (30%) businesses saw late payments increase over the last three months of 2021, and around one in 10 (8%) said late payments were threatening the viability of their business.

 Want to stay up to date with the news? Sign up to our daily bulletin.

Enfield (Locality), London (Greater)
£27,430 - £34,809 per annum plus excellent benefits
Lee Valley Regional Park Authority
Winsford, Cheshire
£29,793 to £36,369
Cheshire Constabulary
CIPS Knowledge
Find out more with CIPS Knowledge:
  • best practice insights
  • guidance
  • tools and templates