Piece missing from David Cameron’s plans to encourage supply chain finance
UK Prime Minister David Cameron has today urged large businesses to adopt supply chain finance (SCF) to help release $20bn in new finance for UK firms. While there are few organisations that would wish to deny their suppliers the benefits from early payment – access to credit, improved cash flow, and support for job growth and aspiring businesses – there is a piece missing from Cameron’s announcement that can hinder take up.
For SCF to have a significant impact, a company must receive and approve invoices swiftly and accurately before a financing party can advance funds to suppliers. For many large organisations, this process is still paper-based, manual, error-prone and incredibly slow.
By the time an invoice has been delivered by the postal system, landed on the right desk, been accurately keyed into the finance system, found its way to the appropriate approver and been marked as approved, weeks may have passed. For supply chain finance to have a meaningful impact on a supplier’s cash flow it needs approval within a matter of days, if not hours.
Cameron’s scheme could have a huge impact on the UK economy, bigger, we believe, than the £20bn he has cited. Key to making this a reality, however, is electronic invoicing. Guaranteed invoice delivery direct into a buyer’s accounting system with status updates available at each stage of the process ensure suppliers can opt to receive early payment through supply chain finance.
Until recently, supply chain finance has been initiated by a buyer and restricted to its strategic suppliers. e-Invoicing is the precursor to the mass adoption of SCF. And the development of more sophisticated services that don’t necessarily require a bank and build on the existing connections between buyers and suppliers, are making the benefits from supply chain finance widely available.
We're excited to see the results of this drive and wholeheartedly endorse David Cameron’s call to large business.