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The European Commission’s
Late Payments Directive,
which had to be transposed
into law by all 27 Member
States by March 16, 2013 and
implemented this year, puts
the onus on governments to
improve the speed with which
they pay their suppliers.
Through SCF, SME suppliers can reduce their
reliance on the bank short-term lending
market. SMEs are paid quicker, reducing their
days sales outstanding and achieving faster
access to funds for enhanced working capital.
By improving SMEs’ access to credit, increasing
their borrowing capacity and lowering their
borrowing costs, SCF can position SMEs for
growth and thus help drive the recovery.
In addition, SCF can result in lower
procurement costs for governments, as lower
finance costs for SMEs should feed through to
the cost of the goods and services they supply
to governments. Consequently, SCF helps
governments achieve their austerity and cost
reduction goals.
Additional benefits
The European Commission’s Late Payments
Directive, which had to be transposed into law
by all 27 Member States by March 16, 2013
and implemented this year, puts the onus on
governments to improve the speed with which
they pay their suppliers. The Directive creates
a statutory right for suppliers to receive
interest 30 days (in the case of a public sector
buyer) or 60 days (for purchases made by
businesses) after the date of the invoice,
unless another payment period has been
negotiated in the contract.
Many governments currently pay much later
than 30 days after the invoice due date and
the financial implications of the Late Payments
Directive could therefore be significant.
However, SCF can help governments to meet
their Late Payments Directive obligations
without affecting government finances.
SCF can also further governments’
digital agenda. Many governments have
already embraced electronic tendering
and procurement. SCF adds the ability for
suppliers to be paid electronically, and
choose how and when they want to be paid,
with discounting adjusted accordingly.
Governments therefore have an opportunity
to create a streamlined end-to-end process
that supports their digital agenda and adds
value for both government and its suppliers
by providing additional management visibility
into the payment process.