PwC’s annual Working Capital Study found that the use of vendor financing to shore up suppliers or drive Days Payables is gathering pace. Adoption rates have increased significantly since 2014, particularly driven by increased uptake from companies below £5bn in annual revenues. 

The principal reason for implementing a supply chain finance programme were:

Source & Copyright©2018 - PwC 

PwC also found that, although “financing solutions have seen an increase in popularity, our ‘SCF Barometer’ shows that the level of spend typical programmes cover remains relatively limited. Nearly half of all programmes include only up to 25 suppliers.”

“Also, the majority of programmes cover only 20 percent of overall spend, which tends to focus on the larger and most stable suppliers. Often this is driven by the complexities of implementing traditional SCF programmes.”

SMEs need early payment programmes

In a joint survey of SMEs with Previse, a fintech company, PwC found that this group of companies faces the largest challenge on liquidity. It also showed that SMEs have a higher adoption appetite for early payment programmes, not surprisingly as 77% of SMEs experience slow payments from large corporates.

PwC believe write that, “increasingly, large corporates are looking to extend existing SCF programmes to cover a larger share of their spend, with the inevitable challenge of covering a large volume of smaller suppliers. SCF is an attractive way for SMEs to sail towards better working capital, accessing cash at competitive rates, and benefiting from predictable cash flow.”

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CTMfile take: But will large corporates every offer instant payment to their SME suppliers? Self centred WCM in large corporates seems to be endemic.