- New regulations will oversee the payment schedules of U.K.-registered companies, The Wall Street Journal reported last week. Late payments to suppliers have become more prevalent and are contributing to the demise of small businesses.
- Twice a year, companies will now be required to submit records of payments, which will allow smaller companies to dispute claims of payments made if needed. Withheld payments are a means of temporarily inflating company profits and potentially presenting better health than the reality.
- Often, companies promise a 60-day turnaround when in reality, 90 days or more elapse between the delivery of products and payments received. Bridge loans that were once available to help sustain operations for smaller companies are no longer available.
Slow payments to suppliers is an international problem, causing bankruptcies and layoffs throughout the world. A variety of options for resolving the issue exist beyond government regulation and forced transparency, though many are only beginning to reach the mainstream.
One example comes via Foxconn subsidiary FnConn and Chinese online lending marketplace Dianrong, which recently launched a new supply chain finance platform called Chained Finance to issue loans to small manufacturers through blockchain technology.
Ensuring payment regardless of company policy means more companies will survive in regions where government oversight for such matters does not exist. The growth of platforms like Chained Finance is an active step to avoid supplier struggles and provide the funds to continue operations. It’s a strong alternative to failure, and a bridge over unregulated payment turmoil. Of course, the most reliable alternative is paying on time or providing suppliers with a reliable payment schedule — uncertainty over timely payments is a larger risk than long payment terms.
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