Obama and Fast Payments to Suppliers?
Robert Menard,
Certified Purchasing Professional,
Certified Professional Purchasing Consultant, Certified Green Purchasing Professional, Certified Professional Purchasing Manager
No matter one’s politics, when the subject of President Obama and business appears in one headline, it stimulates curiosity and provokes investigation. Such was the case with the Washington Post story entitled “Obama pushes faster payments for small businesses with help of Apple, IBM, FedEx” authored by J. D. Harrison originally published on 11 July and subsequently syndicated nationally.
Since payment to suppliers is a perennial source of argument and consternation in the Procure-to-Pay (P2P), sometimes called Source-to-Settle (S2S) universe , running this thunderbolt to ground was mandatory.
The story reveals a White Hose initiative called “SupplierPay”, an initiative intended to encourage large businesses to pay their suppliers more promptly. Among the 26 corporations endorsing this initiative are Apple, IBM, Coca-Cola, FedEx, Honda, CVS and Walgreens. These and other larger companies have agreed to pay suppliers more quickly and assist suppliers in securing less-expensive financing.
White House officials cited that small suppliers on average wait about two months to get paid for goods and services and those wait times, according to the Wall Street Journal , are growing. “For the larger companies, joining SupplierPay demonstrates recognition that a healthy supply chain is good for business,” the White House. The statement continued, “For small firms selling to those corporations, it will translate into “more capital to invest in new opportunities, new equipment, and new hiring”.
SupplierPay is modeled after a similar White House initiative called QuickPay that requires federal departments to hasten speed to small-business contractors, ideally within 15 days. The White House blog claims that the savings for small contractors has exceeded $1 billion in the three years of QuickPay’s existence.
The Post story cited one firm that serves as both a prime contractor to the federal government and as a subcontractor to other larger firms. It may wait 75 to 90 days for payment as a sub but only two weeks for direct payment from the government on its prime contracts.
It is well worth the effort to invest in supplier development. Perhaps the best starting point with a high performing, low Total Cost of Ownership supplier is prompt payment.
