I despise ‘big business tactics’ of delaying payment, especially to smaller suppliers. It doesn’t do anyone any good in the long term and they need to be dissuaded from doing so wherever possible.
But is the answer really cheap credit provided by the UK government? It’s not the lack of available credit that’s the problem for the FTSE 100, it’s the will to change.
The argument about supply chain financing meaning it takes longer for money to reach small suppliers doesn’t hold any weight with me either. Surely the point is that the supplier gets paid immediately, the customer gets to hold on to their cash for longer and the bank sits in the middle and provides the short term line of credit (which someone somewhere is presumably pays for of course).
The fact that there are still so many big companies treating their suppliers badly and making late payments is pretty outrageous and they should all be ashamed of themselves. It’s no good for them either if they ultimately end up damaging their own suppliers and causing problems with their own supply chain.
However I don’t understand why the government are getting involved. Surely the banks are falling over themselves to provide the likes of Tesco with supply chain financing agreements without the government needing to spend millions in the process?
These big companies need to be thinking about their supply chains more strategically and with a longer term view. They should also be able to efficiently and quickly process invoices and payments and using tools such as payables financing allows them to do this in a very cost-efficient way by using streamlined processes and clever financing solutions.
Delaying payment is an outdated form of ‘working capital management’ (if such tactics can even be called such a thing) and responsible, grown up businesses with effective invoicing and payment processes should have no need to play these games.