Asda has sparked panic among suppliers by sending out a letter that appeared to say it would pay them straight away, in exchange for them knocking 12% off the bill. However the letter failed to clearly explain that it was referring to the rate of interest. Angry suppliers spoke to The Grocer to tell them the scheme was "exploiting those who were desperate for cashflow" and was "daylight robbery". The furore was prompted by a letter sent to suppliers on 17 April by chief financial officer Judith McKenna outlining Asda's new 'Pay me Early' scheme. The letter said suppliers could "select invoices today and receive payment tomorrow instead of waiting to be paid to the normal agreed terms." This would be in exchange for an early payment discount, the letter said, adding: "The rate we are launching at is 12%". Several suppliers assumed Asda was proposing to knock 12% off the total bill, and Asda financial controller Monica Turner admitted she had been contacted by confused companies asking for clarification. The scheme in fact referred to 12% APR, something the letter made no reference to. "It is incredibly unclear considering it was sent by a finance director," said one supplier. "I have been in business for 25 years and I have never seen anything like this. There is nothing in the letter to suggest it is referring to an interest rate." Another supplier, also under the impression the letter was referring to a 12% discount, said the scheme would only appeal to "those who are between a rock and a hard place. "It is exploiting those who are desperate for cashflow," he said. "This is a corporate time bomb that could go down extremely badly with the government, which is trying to protect small businesses. No one can afford to take a 12% cut." Duncan Swift, partner at accountancy firm Grant Thornton, said the letter was confusing: "If I were a supplier I would read that Asda was asking for a 12% discount. They need to spell out what the full terms and conditions are." There even appeared to be confusion about the scheme at Asda. A spokeswoman initially confirmed the scheme did refer to a 12% discount, but later said it was an APR. But another supplier told The Grocer it was clear the letter was referring to an APR. "It didn't cause us outrage," said the supplier. The voluntary scheme was first mooted at a supplier meeting in February, he said, and was promoted to suppliers as a way they could have extra flexibility by being paid early. "There is not an enormous amount of shock because most suppliers were at that conference in February where the whole scheme was explained. The rate does look a bit high but that might suit some suppliers. It wouldn't appeal to us though." Turner said she would consider sending a letter of clarification. The Asda spokeswoman also stressed the scheme was optional: "For many people it will be quicker and easier than trying to arrange a loan or an overdraft with the bank." In a statement Asda said: "Pay Me Early won't suit everyone. But it does give suppliers more control, enabling them to manage their cashflow more effectively. As things get tighter I believe this service will be of considerable benefit to our suppliers."