The signing of another six major Dutch companies to the Betaalme.nu programme was a real milestone. The total number of Dutch companies that have taken the ‘Pay Me Now’ pledge is now 40 – but our ambitions for Betaalme.nu certainly don’t stop there.
Since the programme was launched by Minister for Economic Affairs Henk Kamp at the Supply Chain Finance Forum in 2014, the message has been getting across to companies across The Netherlands that they cannot adopt a ‘one size fits all’ payments strategy. Instead, they need to deploy a spectrum of solutions, fitting the right payment arrangements to the right suppliers. For example:
- Larger suppliers are typically well placed to benefit from a product such as reverse factoring, which makes it possible for the supplier to get early access to cash while conferring a working capital benefit on the buyer.
- In the middle tier, dynamic discounting is a simple, straight-forward solution that works well, enabling buyers to get a P&L benefit while putting cash into the hands of suppliers who need it.
- For the smallest suppliers, buyers are unlikely to be able to get any meaningful working capital benefits, and the maximum P&L benefit has almost certainly already been achieved during the course of negotiations with the suppliers who were keenest to get the business. Products such as procurement cards can help, but really the benefit they give to the buyer is operational efficiency in the payment process.
Betaalme.nu (“Pay me now”) fits into this third tier in the spectrum. The programme asks companies to pledge to pay their smallest suppliers within 30 days – that is a key commitment underpinning the initiative. It also urges companies to make facilities such as reverse factoring or dynamic discounting available to larger suppliers.
The 30-day pledge is the keystone. It is intended to help suppliers that are probably in no position to negotiate those sorts of payment terms on their own – the balance of power between buyer and seller is tipped too far on one side. And it’s helping a class of suppliers from which buyers can’t really derive significant extra working capital or P&L benefits, anyway.
And yet the benefit to society is phenomenal. Our target for Betaalme.nu is for 500 of Holland’s leading companies to sign up to the programme. Today we are on 40. But already the prompt payment benefit is being felt by 100,000 suppliers who, between them, supply €1bn of goods and services. That’s €1bn a year, reaching the smallest SMEs within 30 days of their invoice being submitted. Imagine what would happen to the country’s economy if that keystone were to be taken away.
We have to be realistic, however. No, that doesn’t mean we lower our sights and scale down our ambitions. Quite the opposite. When I say we have to be realistic, I mean that we have to recognise that, however noble our Dutch programme, it’s sometimes hard for the largest multinationals to sign up to it – not because they aren’t interested or don’t care, but because they are not structured on a country basis. This is especially true within the eurozone, of course.
So we have to be realistic about the fact that these large companies’ supply chains span national borders that, in business terms, almost no longer exist. Therefore, we need a pan-European equivalent to Betaalme.nu.
The EU Payment Directive fails to meet the need that Betaalme.nu satisfies: its standards aren’t as high and it has too many get-out clauses. The basis of the Directive is 60-day payment terms, unless the parties “agree” that longer terms are appropriate and that the supplier won’t be harmed by it. It’s hardly an agreement between equals. A pan-European version of Betaalme.nu would sweep away that imbalance.
As Minister Kamp reminded us recently, prompt payment of the smallest suppliers is part of corporate social responsibility. There isn’t much of a business case to support it – it’s just a good thing to do.
Taking this kind of message to the European level isn’t easy. Such a lofty goal needs a strategy. Fortunately, we have already seen such a strategy in action, in the genesis of Betaalme.nu itself. A handful of large companies recognised that 30-day payment terms were simply the right thing to do. They approached the Dutch government to find a way of creating a code or pledge that could then be used to put pressure on other large companies to sign up to these terms. And so Betaalme.nu was underway.
Going to the European level requires the same sort of approach: a handful of the largest European companies willing to engage with the European Commission and convince them that this is the direction we need to be going in, creating a code that can then be used to put pressure on other large corporates to acknowledge their social responsibilities towards their suppliers.
A betaalme.nu pledge for Europe? It’s a challenge that’s dwarfed only by the opportunity.