Keywords: euro, einvoicing, electronic invoicing, dynamic discounting, cash reserves, upfront payment, Western Union Business Solutions

Eurozone crisis 'hitting small suppliers hard'

Susie West | News | 15 June 2012

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The on-going crisis in the Eurozone is having a worrying effect on small suppliers who are reportedly demanding payments to be made upfront from buyers.

Figures from Western Union, seen by the Daily Telegraph, show that the deepening crisis is leading businesses to wait until the last moment to pay suppliers in the hope of better exchange rates.

On average, 31% more currency exchanges were made during the last five days of the month than in the first five days during the first quarter of 2012. According to Western Union, this is more than double the level of usual trading.

It was reported that struggling small suppliers in Spain, fearful that they will not have enough cash reserves, are asking for 30% of payments upfront and the remaining 70% to be paid instantly on the arrival of goods.

Dynamic discounting could be one way to ensure that payments are made efficiently and easily. For businesses, they can get a better return on investment by being offered a discount, while small suppliers receive their money early or on time and build up their cash reserves.

e-Invoicing can also ensure that payments are made to suppliers instantly, removing the customary 30-day period.

David Sear, Chief Operating Officer of Western Union Business Solutions, told the Daily Telegraph that uncertainty regarding the Eurozone is also leading businesses to place much smaller value orders.

"There's a reluctance to place large orders. Companies don't want to hold inventory because they don't know where the market will be. There are also longer periods of time between customers trading," he explained.

"The reticence in the marketplace in itself lowers economy activity, and if things pick up, firms won't be able to meet demand because they have no [stock]."

Encouragingly, general business confidence is believed to be stronger than first thought, despite Spain's recent bailout and Philip King of the Institute of Credit Management told the newspaper that the Eurozone's impact on small companies has been "surprisingly modest".