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KEEP YOUR CASH CLOSE AND YOUR SUPPLIERS CLOSER

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Andrew Jesse

By Andrew Jesse, VP, Basware UK

A report published earlier this year showed that mobile tradespeople and microbusinesses in the UK are owed a collective £2.5bn in outstanding payments per year. More strikingly, they write off up to 96 per cent of that debt – or around £2.4bn per year. That’s a huge burden to bear, and an action that has long-term implications because it limits these businesses’ ability to re-invest and grow.

It’s not just microbusinesses that find themselves at the wrong end of late payments. This is a problem that impacts companies small and large throughout the economy. Given that a smooth-running supply chain is critical to every company’s success, it seems counterintuitive that companies would indulge in payment practices that create conflict with their suppliers. But they do – so why is this?

Andrew Jesse

Andrew Jesse

The fact is that, in the wake of economic downturn, companies are holding on to their cash at all costs. The recession reinforced the premise that cash is king, and as companies have become accustomed to the benefits that healthy cash flow can bring, they are reluctant to loosen their payment policies – even as the economy improves. Today it isn’t uncommon to see multi-billion pound companies extending payments to their suppliers by 60-100 days to ensure that they have funds available for self-development, dividends or other purposes.

But regular late payments can pose a serious risk to a small supplier’s financial health, given that they have less of a financial ‘buffer’ than their larger counterparts. So, it’s unsurprising that extended payment policies are putting pressure on buyer-supplier relationships.

It’s not just policies that are delaying payments. The efficiency of the day-to-day financial processes used by buyers and suppliers has a significant impact on the speed that payments are made – and there is much room for improvement in this area, too.

The majority of companies globally have inefficient systems in place to send invoices. In fact, a study we recently conducted with the Institute of Financial Operations found that only 15 per cent of companies send out the majority of their invoices electronically. Given that a paper invoice sent through the mail typically takes two weeks to be received and entered into the buying organization’s system, its crucial that companies find means to send and receive invoices more quickly.

The problem is exacerbated by manual processing methods, which are also commonplace in many companies. Once received, a paper invoice must be scanned or otherwise inputted into the buying organization’s system before it can be processed – this leaves room for inaccuracies or even loss. But if companies introduced automation to their invoice processing, the risk of both these problems would be diminished.

While e-invoicing can speed up processing, the timing of payments is still dependent on buyers, who have incentives for holding on to their cash longer. But new solutions that combine e-invoicing with e-payment are changing these dynamic and allowing suppliers to benefit from faster payments. These solutions, which combine the services of a financial institution with those of an e-invoicing services provider, ensure that suppliers are paid upon invoice approval yet also extend payment terms for buyers.  It’s a win-win situation, boosting the cash flow of both parties and avoiding the payment issues that put undue pressure on suppliers and negatively impact the buyer-supplier relationship.

The combination of e-invoicing and new e-payment solutions helps solve extended payments and supplier cash flow issues.  It not only gives suppliers quick access to payments, but it also provides buyers and suppliers with the cash flow needed to ensure their businesses can operate smoothly. With cash flowing more freely across the supply chain, buyers and suppliers can focus on what matters most: building their businesses and furthering their relationship in mutually beneficial ways.

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KPMG UK to split roles of chair and chief executive

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KPMG UK to split roles of chair and chief executive 1

(Reuters) – KPMG UK said on Thursday it will split the roles of chair and chief executive, adding it will hold an election process for the CEO position.

KMPG said Bina Mehta would remain non-executive chair of the UK board for the next 12 months and would oversee the CEO election process, which it plans to begin this month and conclude by the end of April.

The elected chief executive will serve until the end of September 2025, the company said. Mary O’Connor, head of clients and markets, will remain as CEO while the election is conducted.

Mehta and O’Connor were appointed to the temporary positions earlier this month when former UK chair Bill Michael resigned after an investigation was launched into reported comments to staff that they should “stop moaning” about the impact of the COVID-19 pandemic on their lives.

(Reporting by Kanishka Singh in Bengaluru; editing by Jane Wardell)

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Tesla’s Musk says U.S. factory closed for two days due to parts shortages

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Tesla's Musk says U.S. factory closed for two days due to parts shortages 2

(Reuters) – Tesla Chief Executive Officer Elon Musk said the electric vehicle company’s Fremont, California plant shut down for two days this week due to “parts shortages” and had reopened on Wednesday.

Shares of Tesla fell 8% during the day after Bloomberg reported that production of Tesla’s less expensive sedan, the Model 3, had been temporarily suspended, raising questions about whether it had enough supplies to keep the assembly line moving.

Several automakers, including General Motors Co, Volkswagen AG, and Ford Motor Co, are hit by the shortage of chips, forcing them to scale down production.

“Fremont shut down for two days (parts shortages) & restarted yesterday,” Musk said in a Twitter posting.

A person with knowledge of the situation told Reuters that at least some workers had been told they could take off Wednesday and Thursday, while another person said some employee parking lots appeared to have fewer people than usual on Thursday.

Electric vehicle news source Electrek quoted Musk as telling employees that production of Model 3 and the Model Y small SUV would speed up to full production over the next few days.

“We are experiencing some parts supply issues, so we took the opportunity to bring Fremont down for a few days to do equipment upgrades and maintenance,” Musk said in an employee email, according to Electrek.

Musk also said that the company was scaling up production of its more expensive Model S and Model X lines, which would soon go back to two shifts, he said, according to Electrek.

The company could not be immediately reached for comment.

Tesla said last month that it might face a temporary impact from a global semiconductor shortage and logistics disruptions at ports.

“This is an industrywide problem rather than anything Tesla-specific. But this episode provides a very useful reminder that EV manufacturing is subject to periodic supply chain bottlenecks, whether related to chips, or batteries, or other components,” Raymond James analyst Pavel Molchanov said by email.

Samsung Electronics, which supplies chips that control self-driving capabilities to Tesla, last week said it had suspended its factory in Austin, Texas as a winter storm caused power outages. The Tesla chips are made in the Texas factory, the automaker said two years ago.

Samsung declined to identify its customers for the factory.

It was unclear how much volume or revenue Tesla would lose due to the production halt. The Fremont plant has an annual production capacity of 500,000 Model 3s and Model Ys combined.

Tesla last week reduced the price of its cheaper variants of the Model 3 and the Model Y, the latest in a series of price cuts at a time when legacy automakers are trying to fight back with new models.

(Reporting by Hyunjoo Jin in San Francisco and Munsif Vengattil in Bengaluru; Editing by Maju Samuel, Peter Henderson and Sam Holmes)

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Boeing, hit with $6.6 million FAA fine, faces much bigger 787 repair bill – sources

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Boeing, hit with $6.6 million FAA fine, faces much bigger 787 repair bill - sources 3

By Eric M. Johnson and David Shepardson

SEATTLE/WASHINGTON (Reuters) – Boeing Co will pay a $6.6 million to U.S. regulators as part of a settlement over quality and safety-oversight lapses going back years, a setback that comes as Boeing wrestles with repairs to flawed 787 Dreamliner jets that could dwarf the cost of the federal penalty.

Boeing is beginning painstaking repairs and forensic inspections to fix structural integrity flaws embedded deep inside at least 88 parked 787s built over the last year or so, a third industry source said.

The inspections and retrofits could take weeks or even up to a month per plane and are likely to cost hundreds of millions – if not billions – of dollars, depending to a large degree on the number of planes and defects involved, the person said.

The Federal Aviation Administration said Boeing had agreed to pay $6.6 million in penalties after the aviation regulator said it failed to comply with a 2015 safety agreement.

The penalties include $5.4 million for not complying with the agreement in which Boeing pledged to change its internal processes to improve and prioritize regulatory compliance and $1.21 million to settle two pending FAA enforcement cases.

“Boeing failed to meet all of its obligations under the settlement agreement, and the FAA is holding Boeing accountable by imposing additional penalties,” FAA Administrator Steve Dickson said in a statement. Boeing, which paid $12 million in 2015 as part of the settlement, did not immediately comment.

Boeing engineers are working to determine the scope of inspections, including whether jets can be used as-is without a threat to safety, two people said. Boeing has not told airlines how many jets are impacted, another person said.

The FAA has been investigating instances of oversight lapses, debris left inside finished aircraft, and managers putting pressure on employees handling safety checks for the FAA, people familiar with the proceedings said.

For example, in August 2020, Boeing told to the FAA about the flaw involving structural wrinkling in the interior fuselage skin where carbon-composite barrels that form the plane’s lightweight body are melded together.

But the defect went unnoticed for months or longer because computerized safeguards that crunch data looking for quality flaws had not been programmed to look for the gaps, a third industry source said.

DELIVERY TARGET

The 787 production problems have halted deliveries of the jet since the end of October, locking up a source of desperately needed cash for Boeing.

The fuel-efficient 787 has been a huge success with airlines, which have ordered 1,882 of the advanced twin-aisle jet worth nearly $150 billion (74.7 billion pounds) at list prices.

But the advanced production process and sprawling global supply chain caused problems over the years.

As of February, Boeing had fixed the 787 production process causing the wrinkling defect, according to two people familiar with the matter.

However, planes rolled off the assembly line with the flaw for more than a year, at least, continuing even after the flaw was discovered in August 2020.

“It’s difficult to see a definitive fix that is agreeable by the aviation authorities and all going forward,” Boeing customer Air Lease Corp’s CEO John Plueger told analysts on an earnings call Feb 22. “I don’t think that we’re there yet.”

Boeing has been working on the fuselage problem, and two additional potentially hazardous defects that arose since 2019, as it charted plans to consolidate final assembly of the 787 in South Carolina starting next month, at a sharply reduced rate of 5 787s per month.

One senior supply chain source said they will have to cut rate again.

Boeing said last month it expects to resume handing over a small number of 787s to customers later this quarter.

It has an ambitious internal plan to deliver 100 of the jets this year, one person said. Analysts say deliveries are not expected to recover to 2019 levels until at least 2024.

‘OPEN-HEART SURGERY’

But before any jet is delivered, it must go through invasive inspections and costly repairs.

First, technicians must pull out the passenger seats, open up the floor paneling and use specialty tools to measure whether defects invisible to the naked eye are present, according to three people with direct knowledge of the process.

The repair work – already underway at Boeing factories in Everett, Washington and North Charleston, South Carolina – is even harder.

In the bowels of the jet, technicians have to remove multiple specialty fasteners on both sides of the inner fuselage skin, then install newly produced “shims” that fill out gaps and remove the structural dimpling. Workers then replace all the fasteners, re-paint, and re-install the interior, they said.

“It’s like open heart surgery,” one of the people said. “They’ll be retrofitting the fleet for potentially several years.”

(Reporting by Eric M. Johnson in Seattle; Additional reporting by Tim Hepher in Paris, David Shepardson in Washington, and Tracy Rucinski in Chicago; Editing by Nick Zieminski)

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