Are you a supplier to Government entities?
The Government has published a Supplier Relief Policy which outlines guidance for public bodies (Contracting Authorities) on paying their 'at risk' suppliers. At the very least bodies should attempt to pay as normal but should also look at additional support that can be provided.
For those who fall into this category, this will come as very welcome news and will allow for a much-needed certainty around cashflow. Whilst timing of other government measures and support are still being defined, this assistance should be immediate and ongoing.
The definition of Contracting Authorities includes:
- central Government departments;
- executive agencies;
- non-departmental public bodies;
- local authorities;
- NHS bodies; and
- the wider public sector.
The definition of at risk is not clear at this time but in current circumstances can be widely interpreted. Companies who believe they may fall into this category should consider contacting the public bodies to discuss payment arrangements.
The policy outlines that Contracting Authorities:
- Urgently review contract portfolios and identify suppliers who they believe are at risk. Then inform these suppliers that they will continue to be paid as normal, even if service delivery is disrupted or suspended, until at least the end of June.
- Put in place the most appropriate payment measures to support supplier cash flow. This might include a range of approaches such as forward ordering, payment in advance, interim payments and payment on order (not receipt).
- If the contract involves payment by results, then payment should be based on previous invoices. For example, the average monthly payment over the previous three months.
- To qualify, suppliers should agree to act on an open book basis and make cost data available to the contracting authority during this period. They should continue to pay employees and flow down funding to their subcontractors.
- Ensure invoices submitted by suppliers are paid immediately on receipt, reconciliation can take place in slower time in order to maintain cash flow in the supply chain and protect jobs.
See the full Supplier Relief Policy here.
Wider supply chain considerations
Coronavirus is and will undoubtedly continue to cause disruption to supply chains on an international scale.
We are beginning to see signs that China is recovering from both a health and exports perspective. This could begin to alleviate some supply chain pressure for some industries, but certainly not for all. This is particularly pertinent as Europe has now overtaken China in the number of cases and deaths arising from this pandemic, and it is showing no signs of slowing.
We can expect to see, and are already seeing, supply and demand fluctuate across the European market, but what does this mean for global supply chains?
For almost all sectors and industries travel restrictions and labour shortages will have knock on effects. In some cases, the complete stopping of production will be devastating, and so pre-emptive action and planning is key.
|①||Get a full and accurate picture of your supply chain.|
|②||Managing your cash will be a priority, and stress testing is key to helping with this.|
|③||Optimising production and assessing the ability to distribute will help Senior Management and Boards assess current and future ability to operate with regards to both workforce and supplies.|
|④||Flexibility will be key. Understand where there may be enhanced demand for certain elements of production and, if necessary, use less conventional modes of distribution.|
|⑤||Invoices should be paid immediately to ensure cashflow to supply chains.|
Read more here.
Small business supplier payments
The coronavirus pandemic has put many small businesses at risk due to delayed payments as a result of protecting cash flow. In order to maintain effective supply chains and ensure that recovery is swift when the crisis ends, it is crucial that an open dialogue is established with customers and suppliers.
This immense pressure on cash flow, brings into perspective the obligations that larger businesses have, with regards to supporting SMEs through the crisis. Smaller businesses can be critical to the survival of an effective supply chain and so it is important that larger businesses operate with flexibility and open channels of communication. It is essential that small business suppliers receive payment promptly, where possible and that a partnership approach to navigating through this crisis is taken.
The Government’s Office of the Small Business Commissioner (SBC) provide services free of charge to small businesses. There is a collective responsibility for larger businesses to signpost suppliers or customers experiencing late payment to SBC, who can offer practical help and advice. The SBC is also working with large business clients to ensure that there is a flexible approach.
For more information and guidance visit: https://www.smallbusinesscommissioner.gov.uk/
For more information on how we can help you with contracts and procurement during this challenging time, please contact