Is the UK Ahead of the US When It Comes to Supply Chain Finance?

I've been quietly getting more involved behind the scenes in the supply chain finance market in the past six months, learning more and participating in a sector that I think will ultimately grow up to become the major driver of finance-led purchasing and invoicing initiatives. However, the market is extremely immature in North America, with only a handful of vendors and banks fighting for deals whose entire sum on an annual basis represents less than the total costs of a dozen sizable P2P deals. Globally, these tools aren't terribly far ahead of where they are in North America, either. Yet I think there might be some early signs that the UK will emerge as the country leading the adoption curve when it comes to this area. Moreover, the UK appears to be defining standards as to what types of programs are most beneficial.

In the above-linked Procurement Leaders post, we learn that the Association of Corporate treasurers (ACT) in the UK suggests a particular type of SCF program: "One good thing that the ACT has done is to clear up some of the confusion that continues to surround SCF by referring to it as a 'buyer-driven receivable programme.'" Stuart Siddall, CEO of ACT, is quoted noting that "In market conditions where lenders are concerned with credit quality we do believe that buyer driven programmes can and will help ease funding conditions." It's worth reading the rest of the post for additional color on the argument in favor of buyer-driver approaches (which stand in contrast to those where suppliers initiate the early-payment request or sell their receivables to third parties without the consent of the buyer).

Regardless, it feels to me that both the private and public sector in the UK are taking the whole concept of SCF -- including both buyer- and supplier-driven receivables programs -- more seriously than we are in North America, where the concept often remains a convenient extension to eProcurement and invoice automation solutions, with minimal overall penetration. I suspect, however, that as companies continue to hoard cash and as the economy flattens out or drops, and especially as credit continues to get tighter, we'll see this topic begin to take on more importance on our side of the pond. When it comes to reducing supply risk and profiting from receivables while saving suppliers money (relative to factoring) in the process, there's no better approach than what these types of solutions bring. Moreover, the longer working capital management remains a priority and/or top concern for CFOs/controllers on both sides of the transaction, the greater importance they will ascribe to SCF -- or whatever you want to call it -- over other areas of transactional procurement and A/P automation.

Jason Busch

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