Former UK Local Government Minister Phil Woolas on Aberdeen City Council’s innovative Supplier Incentive Scheme.
The idea of making money out of how much you spend may seem a bit outlandish. But that’s exactly what Aberdeen City Council are achieving with their new relationship with their suppliers – the Supplier Incentive Scheme. And good for them.
I divide my time between talking to innovative companies, normally start-ups, who can provide new revenues to Councils and explaining those innovations to the sector. Like most people in Local Government, I don’t believe we will ever be truly free of centralisation until we are less financially dependent. And I have to say – and yes, I am biased – the Early Payment Scheme in Aberdeen is one of the best innovations yet.
The simple idea, cooked up by Oxygen Finance, is to offer a voluntary service to the Councils’ suppliers to pay their invoices quicker than required by contract in return for a small transaction charge. Councils who have taken up the scheme are reporting a 50% take up by companies who see the immediate benefit to their cashflow. As everyone in business knows, late payment is a curse. So, it’s popular with suppliers and it creates a new, not insignificant, income stream.
The scheme is compliant with the new EU-inspired prompt payment Directives, due to start in Scotland in April. It’s also giving Aberdeen and its businesses a win-win advantage.
Once suppliers become a member they have access to a dedicated contact within the council and can submit their invoices electronically. E-invoicing reduces invoice and credit control costs, assures timely delivery and avoids risk of input errors.
Aberdeen City Council’s Convener of Finance, Policy and Resources, Councillor Willie Young, said: “It is another example of the City Council using technology to become more efficient and cost effective in the way we conduct our business.” And he’s right.
The scheme is operated by Oxygen Finance Ltd who implement the IT on top of existing ERP systems and take a small gain-share of the income.