As you probably have heard, exciting news came out of the White House on July 11. President Obama announced the renewal of his administration’s QuickPay initiative and the creation of SupplierPay, a new partnership with 26 private sector companies that have taken a pledge to help support and stimulate the growth of small businesses and create jobs.
We’re thrilled to see Intuit, longtime Tradeshift partner and investor, among the companies that have signed up. We’re working closely with Intuit to connect large buyers with small business suppliers.
Eric Dunn, Intuit’s SVP of Payments & Commerce Solutions explains the importance of this program: “Back in 2009, when the economy was on a downturn, Intuit proactively accelerated payments to support our small business suppliers, which represent 10% of our supply chain. We saw first hand the positive impact this had on them. Now we’re excited to make permanent changes to our payment terms policy to ensure those same suppliers are paid within 10 days,” he said.
As encouraging and impressive as QuickPay and SupplierPay are, I think even more can be done. We challenge the rest of the Fortune 1000 to follow suit. There’s too much at stake not to have every leading enterprise aboard this mission. Today, companies can take it upon themselves to deliver the same value to suppliers and small businesses, with or without a government initiative.
Last month, I appeared on Fox Business to discuss some of the very issues that QuickPay and SupplierPay address. There’s over $2 trillion tied up in the U.S. economy ($16 trillion globally) in what I call the “Pay-Delay Crisis.” Big companies hold on to cash and essentially take loans from their much smaller suppliers to keep money on the books. This practice has existed for decades and has become even more widespread after the financial crisis of 2008, exacerbating the problem further.
Below are the steps can you take to relieve your suppliers of the constraints of long payment terms:
- Implement an AP automation solution that involves suppliers in the P2P process and provides transparency. Your AP team dislikes handling telephone inquiries from suppliers trying to track down payments. Well, suppliers certainly don’t enjoy picking up the phone to chase payments either. Modern AP automation platforms allow suppliers to track an electronic invoice from the moment they send it until it’s paid.
- Offer a dynamic discounting program. If you’ve got the cash on hand, offer your suppliers an early payment and receive a discount on your invoice. A win-win.
- Provide supply chain financing. Maybe you’re not ready to cover that early payment initiative with your own cash. That’s ok. Today there are many financing opportunities that you can help suppliers take advantage of – and they go far beyond a traditional bank. Third parties, like Tradeshift partner CapitalAid, are providing businesses with financing and access to cash at very low rates. Your suppliers get paid quickly and it’s no skin off your back.
The White House’s support for small and growing businesses is tremendous. This is exactly the attention the economy needs. It’s time to free up that $2 trillion in untapped capital. Let’s get that money flowing and put to use – it will build businesses and promote job growth, plain and simple.
Tradeshift blog: The cash-crunch crisis
Blue Hill Research: SupplierPay and the Cynical Optimist