Late payments to suppliers cripple their ability to deliver for customers and ultimately their customers’ customers. At a macro-level, late payments represent a 1.5 percent handbrake on the GDP every year, preventing re-investment in growth, hiring and salaries, weakening the supply chains that keep businesses profitable.
Earlytrade clients have proven that shortening Days Payable Outstanding (DPO) does not require a cost for treasury, burdensome ERP customisations, or use of unfair factoring arrangements that hurt relationships with suppliers.
[Best practice] SCF is often used to improve certainty around the payment times and can be used as an alternative to other, more expensive financing options such as invoice factoring, bridging loans, and using a credit card to cover business expenses.ASBFEO Final Report, Review of Supply Chain Finance
Moreover, the following case studies detail how sector leaders including Coles Group, Lion, and Cleanaway have bolstered their reputations and reduced DPO metrics with low or no net cost and resource requirement.
‘Let’s not muck around’, 7-day cash cycles suit Cleanaway industrial supplier
Like any industrial facility, Cleanaway’s South Windsor recycling plant relies on on-going maintenance and engineering support to ensure safety, operational reliability and continuity.
Merhone, an industrial electrical supplier supported by subcontractors, services and maintains the complex electrical operations of the ASX100 business’ recycling plant.
Previously the Castle Hill-based supplier had to wait on payments from a major client with terms that could have been more than two months. So, the decision to use Earlytrade was all about cash flow for Merhone director Josh Rhone.
“That is a killer for us little guys,” Mr Rhone said. “[Now] we get paid every cycle, so it’s weekly instead of up to 45 days and end of month.
“They’ve got pumps and processes that we look after constantly,” he says. “If they want a new system in there, we do the project from the ground up and get it running. There are lots of little things every day where you’ve got to learn and adapt.
“I just thought, ‘Let’s not muck around’,” he said. “We just calculated it into our profit and losses and it’s just so minimal compared to having that cash flow.
“Liquid money is always better to have than being owed it.
“It goes every Monday and Thursday pay cycles at Cleanaway. As soon as it’s approved, it gets paid in the next cycle. Even if it’s seven days, it’s nothing. No one pays in seven days, even people on seven-day accounts don’t pay in seven days,” he said, laughing.
Lion delivers 30-day terms for 95% of all suppliers, large and small
By comparison, rival beverage giant Lion pays 95 per cent of all suppliers – not just small businesses – within 30 days.Australian Financial Review, 21 September 2020
At the time many large FMCG companies were extending payment terms to their suppliers, as a result some corporations were attracting damaging public scrutiny for poor practices.
Lion saw an opportunity to not only innovate, but use technology to build sustainable partnerships and promote security and flexibility for its thousands of suppliers across Australia and New Zealand.
Lion partnered with Earlytrade to design and implement a custom solution to complement its mandatory 30-day minimum payment terms for all eligible suppliers, small and large, across Australia and New Zealand.
Earlytrade deployed its Marketplace solution to provide Lion suppliers a simple, voluntary and confidential option to further reduce payment terms when it suited their business needs.
Lion’s days payable outstanding (DPO) is measured and reported monthly across all our business units. For example, Lion’s Australian beer business has an average DPO of 24.9 days. Currently, 95 per cent of all our suppliers, not just small businesses, are paid within 30 days. The outstanding five per cent are suppliers whose payment terms are negotiated as part of their contracts with Lion.Lion public submission to the Australian Small Business Ombudsman
Coles sets up small suppliers for success with smart and simple supplier portal
In the midst of the global pandemic in 2020, as part of Coles Group’s commitment to deliver innovative support and reliable cash flow to their suppliers, the supermarket giant implemented Earlytrade Verify to simply and effectively segment their suppliers, specifically small businesses, across its entire group of businesses and shift them onto preferential payment terms of between 15-30 days.
“Earlytrade Verify was a way for us to understand who our small suppliers were. It results in a win-win because we understood that we could be compliant with our external commitments and our suppliers didn’t have to give us any information.”Shane Healey, General Manager Finance, Coles Group
Slow subbie payments a thing of the past with on-site & on-demand Earlytrade access
Small business subcontractors perform over 80 percent of all work in the Australian building and construction industry; much relied on by head contractors and policy makers as the project engines for jobs and the growth.
However, cash flow throughout the construction cycle is slow and inefficient, with Security of Payment Act (SOPA) legislation differing across state jurisdictions. Combined with complex invoice and delivery approvals processes, the longer subcontractors have to wait for payment, the higher the risk of project overruns, delays and unnecessary insolvencies.
Earlytrade worked with a mid-tier construction firm to customise its Marketplace solution for the construction, real estate and infrastructure sectors in Australia, delivering SOPA compliance, and a seamless ‘plug and play’ integration with Jobpac that allows launch of the Earlytrade Build solution in as little as three days.
Subcontractors to the Earlytrade client now have remote access to a bespoke web-app and SMS channel to voluntarily and anonymously access early payments 24/7, onsite or from the office, effectively reducing payment terms from 30 days EOM to on-demand.