SupplierPay update – Good intentions but No Teeth

Two weeks ago the Government sent around an optional data request to the fifty SupplierPay pledges to begin the process of measuring how the program is doing. The request includes a group of quantitative and qualitative questions. This volunteer survey is the first step in analyzing the pledges effectiveness. This survey will go out and collect data around:

  • Average time to pay small and minority owned businesses (this will be self defined by the pledge and not the Small Business Administration)
  • Improvement in time to pay small suppliers form date of pledge
  • Total spend and percent covered by small suppliers

This is the first data collection effort and it will be interesting to see the feedback.

Getting companies to volunteer and pledge without mandating change via regulations (like Brazil or Mexico have mandated electronic initiatives around trade flows) is just a tough road to travel. Companies fear if they pledge, they make a public commitment and risk a public incident with suppliers that say ”you pledged but aren’t living up to the bargain”. I get that. But I also get many companies continue to push terms with their supplier base. Extended payment terms will continue to be a fact of life for small suppliers.

We understand companies have a business and need to be profitable. But there are scalable options now for companies, be they virtual cards, dynamic discounting, working capital platforms, etc. that these companies can use to provide a way for their small suppliers to get paid early, whether it’s the companies cash or a third party.

At the moment, the White House has no teeth in their proposition. But if small business continues to suffer longer payment terms, who knows, maybe actions will be taken that take choice away from big companies.

I have spoken recently to a few large companies that know how to use their balance sheet and treat suppliers. It’s not complex, but it has to start at the top and run down through the organization.

Stay tuned and TFM will share with you what we can from the first survey.

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