The NYT article missed the bigger issue and dismissed the Supply Chain Finance topic too quickly. With SCF, suppliers can get paid at their current term or earlier. It eliminates the morality play around supplier cash flow. SCF also saves small suppliers money in terms of their capital costs. Look at the small supplier cited in the article which had their terms extended from 30 to 120 days. If they financed that extra 90 days with SCF it would have cost them
about 0.25% of invoice value (and potentially saved them money if they took payment on day 10). Instead, they reduced their sales to ABInbev and chose to receive payment via credit card which costs them about 1.5% – 2.0% of invoice value. Without SCF, the supplier had to reduce sales AND pay a rate that is 500%+ higher.

The interesting story here is not that ABInbev is extending supplier payment
terms. Most big companies have already done that and will continue to do so based on various business drivers. The story is why aren’t companies like ABInbev making a relatively easy solution like SCF available to their suppliers. Instead of offering SCF, ABInbev is forcing their suppliers into cash flow issues and/or into expensive solutions like credit cards, the B2B equivalent of pay day loans.

Robert Kramer
VP, Working Capital Solutions
PrimeRevenue, Inc.