The Effect of Immediate Payment on Supplier Confidence, Decision Making, and Planning | adam HTT
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The Effect of Immediate Payment on Provider Confidence, Decision Making, and Planning - Gap Cap

Having a reliable and predictable cash flow is the lifeblood of any thriving business. For suppliers, this means that they look for clients who can be trusted to pay on time. Late payments are reported as threatening 33% of supply businesses. So, if you want to build a positive relationship with your suppliers, you should make sure that you have systems set up to make immediate payments.

Suppliers who have clients who pay immediately and consistently are better placed to plan for the future. Furthermore, they are less likely to go out of business. As well as this, they are more likely to be able to provide a higher quality service with the potential for offering discounts and great value products and services.

When it comes to making payments to suppliers, there can be a lot to keep track of, and payments can easily become delayed in the grind of paperwork. In order to prevent this from happening and to facilitate positive relationships with your suppliers, your company may wish to try Supplier Finance.

Supplier Finance, also known as supply chain finance and reverse factoring is a business solution that has benefits for both suppliers and their clients. As the buyer, it can save you money, and for the supplier, it gives them flexibility and assurances that they will be paid.

So, How Does It Work?

You place your order and are invoiced by your supplier as usual. Your internal systems then approve the invoice and share it with your Supplier Finance provider. When this happens, your supplier will be able to see your approval of the invoice, giving them peace of mind, as they are not just waiting until the due date to know that you intend to pay them.

Once the Supplier Finance provider has the approved invoice, your supplier can now receive early payment. A provider of Supplier Finance will take a small fee for their service. It is up to the buyer and supplier to decide as to who shall pay this fee. In many cases, suppliers will offer early payment discounts, which can mean they will cover the costs, or the cost itself can be covered from the discount they provide.

For your company the payment will simply be taken automatically on the due date, so you don’t need to worry about getting the payment in. In the event that your company needs to extend the terms of the payment, then this can be arranged with the Supplier Finance provider. All the while, your supplier still gets paid on time.

The Benefits For Your Company

By engaging in Supplier Finance, you will be providing your suppliers with a low-risk way to deal with you. By lowering their risk, you will improve your relationship with your supplier, since they will be guaranteed to get your payments on time, every time, in a transparent and traceable system.

In the event that your company needs a term extension, the impact of this will be minimised. An extension will not negatively impact your suppliers, which would damage your working relationship and the terms for doing so will be known beforehand.

The Benefits For Your Supplier

For your suppliers engaging in Supplier Finance gives them flexibility and security. If they need an early payment, they can take it. In some systems, they can even automate this happening if there are circumstances when they would always choose to do so. This means that they can take control of their cash flow without having to resort to expensive loans and relying on debt.

For suppliers who do not need the flexibility, they will still receive their full payments, on time. There is no concern about not getting paid they will never have to worry about payments from your company being late, which will give them financial security and a positive opinion of your company.


Read the other article in this series, focusing on the risk associated with Brexit and how to mitigate them, here.

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