The May round table meeting for the Working Capital Forum saw treasurers from seven multinationals gather to discuss ways of encouraging supplier take-up of supply chain finance programmes, in a meeting sponsored, as usual by American Express.
Of the firms represented around the virtual table, four had SCF programmes in place and three were still considering them. Of those who were already running them, most had relatively low supplier take-up of 10% or less. Only one had seen the programme grow to reach up to 90% of suppliers in several different regions.
Several treasurers mentioned the complexity of supplier onboarding from a supplier perspective with some older programmes still requiring complex, document-based KYC procedures which were a real disincentive to many smaller businesses. For those around the table, the idea of ‘one click’ onboarding through a cloud-based portal was appealing and could improve adoption.
Among the other topics raised during the 90-minutes conversation (held under the Chatham House Rule) were:
ESG objectives for working capital programmes
- Several treasurers said their boards are now asking about adding ESG to working capital programmes
- This can be achieved by offering more favourable terms to suppliers who meet ESG criteria
- One obstacle can be to identify criteria and secure independent verification that suppliers have met them
- A simpler way can be to repurpose some of the incentives provided on card programmes, for example, to donations to favoured ESG causes
Payment terms and the Prompt payment code
- Some treasurers are very aware of the requirements of prompt payment codes, now present in dozens of countries around the world.
- Payment terms in the group varied from 30 days to 120, with two treasurers currently engaged in an exercise to standardise on 90 and 120 days.
- The availability of supplier finance was not always a requirement when extending payment terms – more often suppliers wanted other concessions such as longer contracts or higher volumes
The Greensill effect
- One treasurer asked his peers if the demise of Greensill was having a chilling effect on supplier finance, either on the supplier side or from corporate boards.
- One participant described the Greensill affair as a ‘storm in a teacup’
- The feeling around the table was that Greensill was a ‘one off’ and that its problems did not impact on the wider use of supplier finance.
The Working Capital Forum holds virtual round tables at least once a month, where our members discuss issues of mutual interest in an off-the-record environment. If you are a corporate treasurer or procurement director and would like to join a future Working Capital Forum round table, you can register your interest here.