SupplierPay Initiative Pushes Large Companies To Speed Payments To SMBs

In the U.S. and around the world small businesses that act as supplier for larger firms often have difficulty seeing invoices paid.  Depending on local ordinance, small business owners can legally be made to wait 30-90 days for payments on orders, a situation that many find simply untenable.

It seems that SMBs have now recruited a powerful ally to their cause—President Barrack Obama is spearheading a White House initiative that is intended to help small business owners—the much beloved during election years backbone of the American economy—who supply larger corporations their payments in a little over two weeks.

The Supplier Pay program is a voluntary initiative that the white house is now urging large corporates to sign on to.  Modeled on the QuickPay initiative that requires federal departments pay small-business contractors with in 15 days if possible.  According to a statement released by the White House  since launching three years ago, the program has created more than $1 billion in cost savings for small contractors.

“SupplierPay is the private sector’s equivalent, where companies have committed to pay small suppliers faster or help them get access to lower cost capital.”

The program is entirely voluntary, but has already attracted some big name players who sat for a meeting with President Obama, Senior Advisor Valerie Jarrett, National Economic Council Director Jeff Zients, and Small Business Administrator Maria Contreras-Sweet at the White House on Friday.

Technology giants Apple and IBM are among the 26 companies that have already singed on to the initiative.  Also participating so far are Coca-Cola, FedEx, Honda, CVS and Walgreens.

Apple has gone one step further, and out of step with its normal policy of staying mum on what it pays it suppliers, it has released some of the details of its supply chain.

“Last year, Apple spent more than $3 billion with over 7,000 suppliers running small and diverse businesses, creating tens of thousands of U.S. jobs,” the company said in a statement reported on by TechCrunch.

Apple’s SVP of Operations Jeff Williams attended Friday’s meeting, and the company’s relationship to Metal Impact an aluminum mining outfit (lord knows Apple loves aluminum) that manufactures the Mac Pro’s distinctive cylindrical enclosure was one of the case studies presented.

“We are proud to be making Mac Pro in Austin, Texas, partnering with dozens of component and equipment suppliers from 23 states. The first thing customers notice when they look at a Mac Pro is the revolutionary cylindrical aluminum enclosure which comes from Metal Impact, a small company in Elk Grove Village, Illinois,” said Apple in a statement.

It remains to be seen what impact the new program will have.  Unlike its federal counterpart, this program is not mandatory and businesses can choose to opt in or not.

Still for SMBs who have seen their companies struggle under the weight of late invoicing, and the financial measure they have to take to stay ahead of the economic troubles they cause, the announcement comes as a welcome sign of potential relief.

“Prompt payment is absolutely critical for us,” said Jason Roys, president of Alexandria-based SDV International.  SDV provides technology and program management consulting services for the defense industry and IBM.

While IBM’s turnaround time is faster, Roys says there is no such thing as too much speed in this arena.

“We’re small and cash flow is a major constraint,” Roys added. “If we’re paid sooner, that would allow us to more quickly reinvest our earnings.”

The move from the White House comes as the president is trying to push economic activity without having to rely on legislative action from a gridlocked Congress.