A growing number of companies are offering innovative economic supports to at-risk business partners

Here are some illustrative examples:

• Morrisons announced it would pay all its smaller suppliers as soon as invoices are received to support their cashflow during the pandemic. The company has around 3,000 small suppliers (including 1,750 farmers) who were previously on 14 day payment terms. The company has also temporarily re-classified who would be defined as a smaller supplier (from those with turnover of £100,000 to those with £1m in business) so that an additional 1,000 suppliers can benefit from this cashflow support

• Unilever announced cash flow relief (amounting to €500 million) to support livelihoods across its extended value chain. The company will proceed with early payment for its most vulnerable small and medium-sized suppliers to help them with financial liquidity, and will extend credit to selected small-scale retail customers whose business relies on Unilever, to help them manage and protect jobs

• BHP announced it would made immediate payments of outstanding invoices and reduce payment terms from 30 to 7 days for small, local and indigenous businesses in Australia. This amounts to $100 million being provided more quickly to 1,100 small Australian businesses

• The UK’s Cabinet Office (the department that supports the UK Prime Minister and ensures the effective running of government) has provided instructions to all public authorities (councils, schools, government departments and hospitals) that they should continue to pay their suppliers – even if services have been scaled back or are temporarily suspended. To receive the payment, suppliers have to continue to pay their employees and subcontractors. The Cabinet Office also requests that public authorities “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/prepayment, interim payments and payment on order (not receipt)”

• L’Oréal announced its solidarity with very small enterprises (VSEs) and small and medium-sized enterprises (SMEs) in its distribution network (i.e. those companies buying its products) by freezing the payments they owe until their businesses resume. Companies impacted include hair salons and small perfume shops. L’Oréal also committed to shorten the payment times with systematic immediate payments for their most exposed suppliers

• Breweries Palm, Haacht and AB InBev have suspended rents payable on the premises they own and rent to bar and restaurant managers to help their cash flow in light of premise closures

“The current outbreak of COVID-19 is unprecedented and will have a significant impact on businesses of all sizes. Many suppliers to public bodies will struggle to meet their contractual obligations and this will put their financial viability, ability to retain staff and their supply chains at risk. Contracting authorities should act now to support suppliers at risk so they are better able to cope with the current crises and to resume normal service delivery and fulfil their contractual obligations when the outbreak is over.”                      

UK’s Cabinet Office, Procurement Policy Note – Supplier relief due to COVID-19: Action Note PPN 02/20 (March 2020)