Having conducted possibly the most comprehensive exercise into local government payment practices, Oxygen Finance has published a preview of its insights into the unique challenges and opportunities now facing councils and has unveiled a ground-breaking solution to the late payment problem.
The challenge and the opportunity
Government figures show that £26 billion is owed to SMEs nationwide, with 70 per cent of SMEs having used finance in the last 12 months.
Oxygen has found* that councils’ recent focus on sustainable and responsible procurement now sees 42 per cent of top tier local government sourcing coming from SMEs and more than a quarter of local authority spending being done with local businesses. Furthermore, in a move to be an exemplar in the creation of social value, 35 per cent of councils are taking steps to provide financial support to businesses.
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Ben Jackson, CEO at Oxygen, commented: “Clearly the will in local government is there and the sustainable procurement focus is a terrific first step, but it does increase local, small and micro suppliers’ dependence on the council’s payment performance.”
Oxygen’s findings indicate that late payment is frequently a major issue and performance varies markedly. More than half of all top tier councils don’t adequately monitor their expenditure with SMEs, while the average large local authority paid approximately 16,000 invoices late in 2015/16, to the value of nearly £30 million.
Councils are now uniquely placed to make the next step to early payment count in benefitting their supply chains.
Ben Jackson added: “These initial findings bring into stark relief what we have known for some time; that in many cases, local authorities are the prime funders of their supply chains, while good corporate citizenship is embedded in their culture. However, in many cases far more can be done. As such, local government holds a unique opportunity.
“It’s for this reason that Oxygen is proud to introduce our new £reepay solution as a component of our wider early payment programme.”
Innovative solution – £reepay
£reepay solves the late payment problem by providing councils with the ability to digitally receive invoices from small and micro suppliers and pay them ahead of term for free, helping businesses to invest in growth. Oxygen will identify suppliers that meet the criteria of a small or micro business and actively enroll them into the programme on the council’s behalf without cost to the buyer or supplier.
To enable £reepay, Oxygen has developed sophisticated proprietary technology that enables local, small and micro businesses to issue invoices directly from their native accounting packages and electronically present them into the buyer’s financial systems.
Ben Jackson commented: “We’re very excited to be launching our new product, £reepay. We’re committed to the creation of social value and to advancing corporate social responsibility, and this new product is designed to get cash to those suppliers that need it most, for free.
“Oxygen is leading the way in introducing £reepay to the industry and existing clients have already demonstrated huge appetite for this new model. Our clients will strengthen their social value credentials, while generating savings and efficiencies in their purchase-to-pay processes.”
Oxygen will be launching £reepay to a select group of council decision makers, industry experts and media at an exclusive launch event on 5th July with speakers including Iain Duncan Smith and Phil Woolas, kicking off this year’s LGA Annual Conference and Exhibition.