We talk a lot about how supplier financing saves you millions each year and gives your suppliers access to much needed cash.
But beyond how this benefits you and your suppliers, imagine a world where all of the largest companies gave their suppliers access to early payment financing - what impact would this have on the global scale?
Pete Loughlin at Purchasing Insight calculated the numbers to answer this exact question, and the results are staggering. In this video Pete explains how $2.8 trillion is locked out of the economy because of the time an invoice sits unpaid until the due date and that if suppliers were paid in 10 days, $2.3 trillion would be released into our global economy, saving suppliers $232 billion and buyers $209 billion.
Why does this discrepancy happen? A handful of Global 2000 companies believe holding onto their cash and waiting 60 days to pay their invoices supports cash flow and reduces cost of capital. However, the returns on excess cash are minimal (think <1%) and negatively impact your supply chain.
When we take a step back from the early payment transaction, and look at the global impact of these initiatives, supplier financing can change the global economy for the better. Whether it’s to invest in new warehouse space, meet payroll, or purchase new equipment, the world’s small businesses could use that $2.3 trillion.
But let’s not forget the unconventional reasons to accelerate payments… The stakes are high in a poker tournament? It’s time to upgrade the old beater car? Watch these videos to see those times when your suppliers might just say F@$* It.
To learn more about the micro and macro-economic impact of paying your suppliers early, visit taulia.com/unconventional.