An article on SupplyManagement.com last week highlighted the results of a survey of top concerns facing UK suppliers. Long-time Supply Excellence readers won’t be surprised to find that “late payments” were the #1 cited issue AND that those payments are being extended even further by the suppliers’ larger customers. Notably, “securing access to finance” was another key concern.

So, despite all of the talk about “green shoots” of economic recovery, not much has changed for suppliers in terms of cash flow. While this was a UK study, it is hardly a UK phenomenon. Suppliers in the rest of Europe and the US continue to find credit hard to come by in the quantities they need. In fact, a recent Hackett Group study revealed that over 70% of companies surveyed either already have or are planning to extend their net payment terms to their suppliers.

So while things may be beginning to look up in the economy, suppliers are still having to look out for cash flow issues brought on by later payments.

And what, you may ask, can suppliers do to help their cause and free up some cash?

The options really fall into two categories; collaboration/cooperation with their buyers OR working independently to create liquidity.

The first set of options require a close working relationship between buyers and suppliers. The supplier can incentivize the buyers (or conversely the buyer could propose this as an option) by providing a discount for early payment. Both parties win if the supplier gets much needed liquidity - perhaps at a cheaper rate than they can find in the market, IF financing is even available. While the buyer helps ensure continuity in their supply chain and pays a reduced price that may be comparable or better than the financial benefits of extending DPOs.

The other choice is for suppliers to control their own destiny and look at ways to monetize their receivables. Many have done this before with traditional factoring options, but found they came at a heavy price and become somewhat of a last resort. But as we’ve covered before, options like The Receivables Exchange (a partner of ours on the Ariba Supplier Network) can yield the same results - cash flow for outstanding receivables - but extremely quickly and at a lower price since the market bids on the receivables to drive down the cost through an automated system in real-time.

At the end of the day, the important thing for suppliers to know is that they’re not stuck without any options. The risks of late payments, extended terms and lack of credit make for a tough selling environment. But where there’s a will, there’s a way … to get paid.

Drew Hofler is the Senior Manager responsible for Ariba’s Financial Solutions suite of products. In addition to extensive experience in banking and financial services, Drew is ACH Accredited and held Series 7 & 63 NASD certifications.