Frequently Asked Questions

Local Loop Lancaster & Morecambe is an initiative of two well-known business networkers in Lancaster - Tanya Harris and Peter Walmsley - together with experienced partners in Mutual Credit Services and Informal Systems to launch a Lancaster and Morecambe-based clearing club. You can read more about the team here.

A clearing club is a group of businesses which agree to submit invoice data to a service provider (in this case Local Loop Lancaster & Morecambe), so that as much debt as possible can be cleared without any money changing hands.

Software finds ‘loops’ which connect a number of business through their invoicing. Each loop is an opportunity to cancel out the smallest invoice, reducing the outstanding debt of all participants. A set-off notice is then issued to all businesses in the loop, telling them the amounts which have been cleared from which invoices - both received and payable.

Multilateral set-off is when this happens for many businesses (such as Local Loop Lancaster & Morecambe members) at the same time. The clearing is simultaneous, so no cash need change hands.

We are currently running a trial to collect local spending data from Lancaster and Morecambe businesses. We are doing this using a simple app, which will enable us to evaluate the viability of a Lancaster and Morecambe clearing club, as well as tell potential members how much they might benefit.

You can join the trial via the the app.

We intend to launch the club and start clearing real invoices as soon as we reach a critical mass of participants. Experience shows that as few as one hundred participating businesses, with three of four trades each month with others in the network (with a mix of buying and selling) will be enough to provide noticeable benefits.

Once we’ve reached this critical mass, we’ll invite you to submit real invoices so we can do real clearing to conserve your cash. We hope that this will happen in mid-2023. You can find out more about our roadmap here.

The Local Loop Lancaster & Morecambe team has developed a simple app that can perform clearing, and we are now running a trial to see just how much local businesses could benefit from being part of a clearing club.

During the trial, we will not be collecting actual invoice data, but estimates from interested businesses of their purchasing from local suppliers over a typical three month period.

We will run our loop-detecting software - which is called MTCS - each time there is enough new data. We’ll then send out the results, providing you with regular estimates of the potential monthly benefit to your business of joining the club once it launches.

Participating in the trial costs nothing. It works through a simple and convenient web-app (no need to download anything). You can join the trial via the app here.

Businesses in a clearing club such as Local Loop Lancaster & Morecambe benefit through reduced debt, since clearing reduces the amount owed on payable invoices, without using cash.

Reduced debt without payment means smoother cashflow, with less money required to pay for purchases.

Immediate benefits are therefore improved cashflow, reduced late payment problems, and reduced stress.

Medium term benefits include a reduced cost of finance, and a better relationship with the bank.

From decades of experience in Slovenia, long-term benefits include better trading terms with a wider circle of trusted businesses, and a stronger economy overall.

During the current trial there is no charge, as the aim is just to find out which participants would benefit from membership in the clearing club.

You can join the trial via the the app, and we’ll provide you with regular estimates of the potential monthly benefit to your business.

Once we have the data we need to be sure that the network is viable, we’ll invite trial participants to sign up for clearing real invoices. For this service there will be a £10 monthly membership charge, plus a 0.5% fee on amounts of debt cleared (both VAT-included). Discounts will be available to members of partner business networks.

These fees will cover the club’s operating costs, including the support services provided by Local Loop Lancaster & Morecambe. Because the club is owned by its members, they will always have the choice to vote to lower the fees and/or find a new service provider.

Click here!

The app is designed to be easy to use, but we’re always open to feedback, positive or negative!

Here are some basics:

• • You don’t need to set a password - instead, just enter your email and the app will send you a registration link.
• • All we need for the trial are some estimates of your typical three-month spending with local suppliers - the more estimates, the better we can show what Local Loop Lancaster & Morecambe could do for your business.
• • You can use the app to see which other Lancaster and Morecambe businesses are participating. If you trade with them, then there’s a good chance some of that trade could be cleared through Local Loop Lancaster & Morecambe.

After MTCS has performed multilateral obligation set-off, clearing club participants are informed of which of the invoices they submitted have been reduced, and by how much. This takes the form of a set-off notice, which can be used in standard accounting processes.

Only you and Mutual Credit Services, one of the service partners in Local Loop Lancaster & Morecambe, can see your data. Invoice data are anonymised before being passed to Informal Systems for MTCS analysis.

Invoice loops are circular patterns of payments due that connect businesses in a network. In the invoice loop below, the three traders owe a total of £4300.

Once an invoice loop is found, the value of the lowest invoice can be set off around the loop. In this example, £800 can be removed from each debt, and so the traders each need £800 less in working capital.

For each business, this is as if a customer paid early, with that income immediately used to pay off a supplier. Each one is left with lower debt, while profit and balance sheet remain unchanged.

The overall effect is to reduce the total owed to £1900, without any cash having yet changed hands.

Clearing happens when outstanding invoices are paid, in whole or in part, by coordinated action of the businesses involved.

MTCS is a highly optimised algorithm for detecting and clearing invoice loops in large business networks.

Once an invoice loop is found, the value of the lowest invoice can be set off around the loop, paying off that amount from each invoice, with no cash needed.

Set-off is the accounting term which describes what happens when businesses agree that a sum from a payable invoice can be matched with a sum from a receivable invoice, so that the outstanding amount on each invoice is reduced. No money changes hands.

In a clearing club such as Local Loop Lancaster & Morecambe, multilateral set-off means this can happen for many businesses at the same time.