The COVID-19 crisis has required businesses across the globe to adapt and operate in completely new ways, in an attempt to deliver to the needs of their teams, customers and suppliers. This has included a need for business to work together and support each other more than ever. The success of a supply chain is dependent on the ability of buyers and suppliers to be able and willing to support each other in different ways. The current situation has put pressure on the interactions between the two parties. Buyers have had to urgently source new products and services and, sometimes new suppliers to deliver them and equally suppliers have had to differentiate and offer new products and services to meet changing demands.
One element of the process that hasn’ t changed but has been highlighted by our current global situation is the prominence of the payment part of that exchange. Buyers need suppliers to stay afloat and deliver for them during this period but equally want to protect their financial position and suppliers need to have access to cash to be able to continue to deliver.
During “normal business” cash primarily comes from one of three places, equity from investors or business owners, debt from banks or financiers or from sales to customers. Businesses will also seek to preserve their cash for as long as possible to prolong survival. A way that they could do this is by extending or slowing down payments to their suppliers to hang on to cash – and that puts more pressure on smaller businesses that are already struggling.
Whilst for many suppliers, income has been severely reduced, the costs of running a business do not decline at the same rate. This has meant that many have found themselves with insufficient income to serve their committed financial obligations resulting in many turning to their cash reserves to simply survive. These reserves may support them for a while, but they can run out and for many businesses this is already the case.
So how can businesses support each other when their financial objectives are at odds?
Earlier this year Proactis launched our early payment service, bePayd, that enables businesses to work together whilst bridging the invoice payment gap therefore unlocking cash tied up in invoices.
bePayd, gives suppliers the option of receiving immediate payment on their invoices; weeks, sometime months earlier than their customers’ standard payment terms allow in exchange for a small discount. However, it does this in the simplest and swiftest time possible with delivering utmost convenience. A supplier could receive a payment in just 3 clicks of a mobile phone.
We have also spent the last few weeks working around the clock to simplify the software so that buyers can effortlessly and remotely deploy this solution without any need for physical interaction.
There is an estimated $1.3trillion tied up in unpaid invoices to businesses at any one time across Europe. Imagine the impact of being able to unlock this by enabling businesses to get their payments made sooner. The impact would be significant.
This approach isn’t new, but the way of delivering it is, embracing and supporting early payments will save many businesses and protect supply chains as we settle into the new norm.