Clearing Clubs
Photo by Jiamin Huang on Unsplash
Adapting tools that have been used by banks for centuries, clearing clubs like LocalLoop Merseyside are set to make a real difference to the Commons Economy by improving the cash flow of local businesses and avoiding payment gridlocks.
Payment gridlocks occur frequently among businesses trading with each other, as one late payment can have a knock-on effect on suppliers down the line.
Local businesses can easily form a Clearing Club with supportive guidance from MCS and Informal Systems and our digital tools. This allows them to settle pending transactions through their network, enhancing flexibility on their working capital and creating pathways towards a sustainable economy.
Mutual Credit Services uses multilateral obligation set-off as the engine of our ‘Clearing Clubs’ platform. Participating businesses provide data through an app that integrates with accounting software, which then detects opportunities for network clearing.
Benefits show increasing returns to scale and diversity; the more participants representing the more sectors, the more likely it is that debt-clearing invoice loops can be found.
Local businesses trading with each other can benefit hugely from clearing their debts with the least amount of money, which has become possible with novel software technology.
Clearing Clubs use multilateral obligation set-off, which is a network clearing method that detects loops of businesses owing each other. As a consequence, debts can be cancelled out.