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Rethinking trade through collaboration

There is a cash flow disconnect that exists between organisations, of different sizes, across different industries and in different locations. This is often driven by differing needs within the supply chain.

As a supplier you want certainty that payment will be made to the terms agreed with your customer, or even before. As a buyer you will want to issue payment terms for the goods and services you consume that match the cash benefit to you, or you will leave a gap in your working capital that needs to be funded.

There are many ways to improve supplier relationships and health, such as structuring and streamlining processes, introducing standards and benchmarks, having clear lines of communication, and generally making yourself “easy to do business with.” However, in the current environment this isn’t always the case…but it should be.

Simply paying on time can be made problematic due to trading inefficiencies. Ultimately, suppliers should have access to a valid Purchase Order that clearly outlines the primary terms of trade, inclusive of what is expected, the values involved and the payment terms. This would then allow them to consider the order ahead of any commitment to supply. Subject to adherence to the terms of trade outlined within an order and an accurate corresponding invoice, there should be no reason that payments should not be met. 

For a buyer, clear and standardised order processing offers visibility, control and can result in more accurate invoicing from their suppliers. This in turn can reduce effort associated with the management of suppliers and enable focus on supplier relationships.

The large majority of buyers strive to manage their suppliers well. However, for those with thousands of suppliers, managing them in the same way is complicated. Processes can be inefficient, segmentation can be complex, and both can result in the slowing of processing time and, ultimately, the time to pay.

There is often pressure from one party to the other, and the current trading environment doesn’t currently deliver a solution that works for all...yet.

It’s time to work together on a solution; it’s time to ReThink

Proactis is passionate about the success of businesses and believes that a collaborative approach that serves to benefit all parties IS possible. Our vision is to create a task force of like-minded individuals that represents a diverse demographic of organisations to help drive a stronger UK economy.

Anthony Persse, Financial Solutions Director at Proactis, said “It’s time for change. We need to rethink how businesses trade with each other and develop a true understanding of the challenges faced by all. To do this effectively will take collaboration. As such, we are thrilled to be bringing together a group of highly influential individuals representing such a wide demographic of businesses that are in a position to support the implementation of change required to address the clear cash flow disconnect.” 

As a first step, we are holding a strategic round table on 27 March that brings together Paul Uppal (Small Business Commissioner), Mike Conroy (Director of Commercial Finance at UK Finance), Martin McTague (Chair of Policy & Advocacy at the Federation of Small Business), Claire Reading (Development Manager at the Federation of Small Business), Philip King (Chair of the Prompt Payment Code), Stacey Coote (Partner at Coote O’Grady) and Chris Wilford (Head of Financial Services Policy at the CBI).

Philip King, Chief Executive of the Chartered Institute of Credit Management (CICM), said: “We welcome the opportunity to engage with other business organisations, membership bodies and industry professionals to lead on how we can best collaborate to drive best practice in cash flow management. The opportunity to create a combined vision and a common set of guiding principles is a challenging goal, but one worthy of further discussion and debate.”

Mike Conroy, Director of Commercial Finance at UK Finance, added: “UK Finance and our members have identified the impact on cash flow from poor payment practice as a priority for improvement at a critical moment of uncertainty and transition for UK SMEs. It can only be addressed by collaboration and solutions need to be business-led. I’m delighted to participate as part of such an influential group.”

Chris Wilford, CBI Head of Financial Services Policy, revealed: “Strong, collaborative supply chains are vital to the health of the wider economy – when big, medium-sized and smaller business work together, the economy prospers. Payment terms are a key part of healthy working relationships, and businesses value partners who are reliable and trustworthy: in short, doing what they say they will do. To fix some of the issues in this space, we know that a one-size-fits-all approach rarely works.”

Martin McTague, Chair of Policy and Advocacy at FSB, added: “For many businesses, poor payment practices are sadly still an all too familiar reality and more needs to be done. A third of businesses report that at least one in four payments they’re owed are arriving later than agreed. This is not sustainable. Fixing the poor payment culture in the UK shouldn’t be about pitching small businesses against big businesses – it should be about companies irrespective of size joining forces to show that they are committed to paying fairly and on time. The time for this to happen is now.”

Paul Uppal, Small Business Commissioner, said: “Late payments can be devastating to small businesses. My office has recovered more than £3.4 million in late payments for small businesses so far, and I welcome working collaboratively with organisations and membership bodies in a bid to tackle the cashflow disconnect and make the UK the best place in the world to start and grow a small business, as well as create a stronger UK economy”.

Stacey Coote, Partner at Coote O’Grady, concluded: “As an SME that has been affected by late payment I recognise the impact that it can have both on businesses but also the wellbeing of business owners.  As such, I am passionate about finding a resolution that works for all and believe that this roundtable will be a great step in recognising the challenges businesses face whilst driving solutions that’ll overcome”

The aim of this round table is to consider, and ultimately create, a combined vision and set of principles that can be used to shape a framework that that will help address the challenges that UK businesses face and to help them thrive.

We look forward to sharing the results and next steps with you.