Category: Retail & Apparel
Winner: Jumbo Supermarkten
Summing up: An early payment programme founded on the principals of sustainability and social responsibility – with a focus on the financial health of SME suppliers.
What the judges said: “Demonstrable impact on payment practices.” “Great accomplishment that the programme has been personally promoted and endorsed by Jumbo’s CFO, proving that the internal alignment has been in place.”
- A dual-approach platform providing shorter payment terms and a dynamic discounting option
- Programme adheres to principals of Netherlands’ PayMeNow initiative to promote fair payment terms for SMEs
- Jumbo mainly motivated by social responsibility and need to ensure sustainability of supplier ecosystem
Jumbo – the second largest grocery retailer in the Netherlands with more than 650 shops – prides itself on exceeding expectations for every customer. It aims to offer the best service and largest range of products at the lowest price.
The retailer now wants to ensure its acute focus on customers’ interests also extends to its suppliers and their financial sustainability – particularly for small and medium-sized businesses.
Motivated by a need to be a socially responsible company, Jumbo partnered with C2FO to create an early payment and dynamic discounting platform that would enable the retailer’s suppliers to access liquidity far quicker and more efficiently.
The programme helps Jumbo live up to the requirements of the Netherlands government-backed Betaalme.nu or PayMeNow initiative which promotes fair payment practices for small and medium-sized businesses. SMEs are a vital component to the Dutch economy and yet are financially vulnerable if larger buyers impose lengthy payment terms on them.
The early payment platform helps Jumbo fulfil its goal of maintaining the long-term sustainability of its supplier network. This was a greater motivating factor for Jumbo than achieving specific working capital ratio goals or other financial targets as is often the case for buyers setting up SCF programmes.
The early payment platform offers two options. Firstly, Jumbo offers its SME suppliers who have an annual invoice volume of up to €200,000 a standard payment term of 30 days or less.
There is then an optional dynamic discounting solution for SME suppliers with annual invoices amounting to more than €200,000, where they can opt to receive accelerated payment of approved invoices.
The dynamic discounting arm was launched in June 2019 to a small cluster of suppliers. Suppliers that do choose early payments accept a small discount on their invoice, which Jumbo says is purely to cover the costs of running the programme.
The importance of the early payment scheme to Jumbo’s broader corporate and social responsibility strategy is demonstrated by the programme’s inclusion in Jumbo’s financial reports in April 2019 and the full endorsement from the retailer’s CFO and CEO.
The dynamic discounting programme has had an initial penetration rate of approximately 10 percent in the first three months of operation, with around 9 percent of overall spend accelerated. The average number of days accelerated so far is 31 days. The registration rate so far is around 30 percent.
Suppliers have welcomed the new programme, with feedback demonstrating SMEs are keen to have shorter payment terms that avoid them having to look for other more expensive sources of financing to support their working capital needs.
Suppliers also praised the ability to chose which invoices to accelerate depending on their financial requirements at that time in their business cycle.