It seems somewhat clichéd to start this blog with a reference back to the financial crisis of 2008. But in the story of how the supplier payment landscape has changed, the 2008 financial crisis plays a starring role.
Cash is king
In the immediate aftermath of the crisis, large businesses were rudely awakened to the fact that banks were no longer an inexhaustible supply of cash and they started to pay much closer attention to managing their own liquidity positions. This included chasing customer payments, managing inventory and of course extending payment terms to their own suppliers. This came in conjunction with increasing bank regulation under the guise of Basel III, which constricts bank lending to SMEs,. The net result - suppliers, and especially SME suppliers, were put under increasing financial strain as their access to cash evaporated.
For some time administrations have been under pressure to respond and we have seen initiatives such at the Supply Chain Finance programme in the UK and SupplyPay in the United States. However, one of the most intriguing initiatives is currently happening in the Netherlands. In December 2014 at the Supply Chain Finance Community Forum, Henk Kamp, the Dutch Minister for Economic Affairs, announced a new programme called BetaalMeNu. Translated quite simply as Pay Me Now, the purpose of this initiative is to encourage large Dutch buying organisations to offer Supply Chain Finance solutions to their SME suppliers. The objective is to ‘free up’ the early payments of €2.5bn to Dutch SME suppliers. This initiative is exciting in that it has a clearly quantified aim and a set timescale. It is something very tangible in a world of soft promises to ‘do better by suppliers’. However, a key problem in achieving this goal was that historically it had been virtually impossible to deliver widespread SCF solutions to SMEs.
The ‘light bulb’ moment
To address this challenge, two pieces of research work were commissioned and contracted to Innopay and M3. Both pieces of research reported back that the key to enable SCF for all suppliers, and especially SMEs, was to connect these suppliers to the buyer through an eInvoicing network through which invoices could be approved more quickly and payments accelerated.
Setting out your stall
Now the SCF Community Forum has taken one step further and issued a ‘Request For Information (RFI) backed by four of the Netherland’s largest corporates – Unilever, Heineken, Philips and Randstad asking SCF vendors to set out, via a written response, how they would enable early payments for SMEs. Out of over 30 initial expressions of interest and 23 responses, just six vendors have been shortlisted to present their solution at this year’s SCF Community Forum. Taulia is delighted to be selected as one of these six vendors.
Sending out a message
The message from the Dutch Government, the SCF Community Forum and from the large Dutch corporates is loud and clear. Not only is the Netherlands recognising the issues caused by SME long payment terms. It is setting out a clear and definable set of steps to address this issue. It is something in our view that provides a bright spot in the world for how Government, buyers, suppliers and vendors can work together to solve the problem of overly long payment. Moreover, there is clear recognition that the new generation of FinTech (financial technology vendors) have a clear role to play in making BetaalMeNu a success, and in turn supporting Dutch business and the Dutch economy.
What has started as a financial crisis is rapidly turning into a shining example of how innovation, technology and a shared common goal can change the game for the better for all parties.