The number of suppliers taking early payment after invoice approval has doubled over the past five years, according to fresh research from supply chain finance (SCF) provider Taulia. 

The San Francisco-headquartered fintech says in a paper published this week that 38% of suppliers surveyed currently make monthly use of early payment programmes, up from 19% in its equivalent survey for 2017. 

The most common reason cited by suppliers is to bridge cashflow gaps, but 27% also said facilities help predictability around payment or collections, with 21% citing help with managing working capital needs. 

“Over the past five years, suppliers have become more interested in being paid early,” Taulia says. 

“This is the consequence of suppliers being more educated about their financing options and knowing that the market has more instruments available to them than just traditional bank loans and overdrafts.” 

Early payment programmes typically involve a financial intermediary between a buyer and its suppliers. Those intermediaries plug the gap between a buyer approving a supplier’s invoice and actually making payment, by offering suppliers payment up front at a discount. 

In buyer-led programmes, SCF providers can also further extend their payment terms without incurring additional balance sheet debt. 

Taulia – which provides a digital platform connecting buyers, suppliers and funders – says the largest increase in interest in such solutions was reported between the surveys for 2020 and 2021, covering the first year of the Covid-19 pandemic. 

During that period, the proportion of supplier survey respondents taking early payments on a monthly basis – rather than rarely or never – rose from 27% to 35%. 

Previous Taulia research, published in August 2020, found that nearly two-thirds of businesses were more interested in early payment programmes and automating invoice processing as a direct result of the pandemic. 

The fintech was also one of several SCF providers that reported a dramatic spike in interest in its programmes in the first four months of 2020, with companies driven by a squeeze on liquidity caused by virus containment measures. 

Despite that, Taulia says it does not expect interest in early payment programmes to drop off in the event of a worldwide recovery from the disruption of the past two years. 

“We foresee interest in early payments growing in line with the development we have seen. This will in part be due to past supply chain volatility leading to a growing recognition of cash flow solutions,” the company says. 

Taulia suggests that a greater number of suppliers believe early payment brings an improved chance of survival during fluctuations, as well as increased stability and growth. 

During the pandemic period, suppliers also reported an increase in significantly late payments by buyers. The proportion of payments made 30 to 45 days late, or more than 45 days late, has risen by 3% and 5% respectively since the start of 2020, Taulia finds. 

The company says such disruption shows business “should be prepared for a wide range of eventualities”. 

“Companies will need to remain flexible and adaptable in the event of a cashflow gap or supply chain disruption,” it says. “The availability of liquidity will continue to remain of the utmost importance.”