Supply Chain Finance Fundamentals Primerevenue-Books Pdf

SUPPLY CHAIN FINANCE FUNDAMENTALS PrimeRevenue
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SUPPLY CHAIN FINANCE FUNDAMENTALS, SUPPLY CHAIN FINANCE. FUNDAMENTAL S, What It Is What It s Not and How it Works. The supply chain ecosystem is a complex one especially for multinational companies that. work with suppliers all over the world The health of a global supply chain isn t just measured. by revenue and profit A more relevant indicator is how efficiently capital flows between. buyers and suppliers Slow moving capital much like slow moving inventory creates. unnecessary costs and inefficiencies in a supply chain. Working capital is critical to every business but its importance is underscored in an. environment that is inherently more susceptible to global and regional economic shifts. industry volatility geopolitical changes manmade and natural disasters and many other. factors To be considered high performing global supply chains must be agile innovative. and competitive in spite of these variables and all that s fueled by working capital Given. these factors it s no surprise that finance and procurement professionals are seeking ways. to more easily access working capital that is trapped in their supply chains. Enter supply chain finance Many finance and procurement executives may have heard of. it but what exactly is it What is it not How does it work A host of misperceptions exist. concerning these questions due in part to an increasingly crowded marketplace of solution. providers many of which bend the definition to fit their offerings. What is supply, chain finance WORKING, A way to increase working. capital and reduce supply chain, risk SCF allows businesses SUPPLY. to increase supplier payment CHAIN, terms and while giving them the.
option get paid early, www primerevenue com 2, SUPPLY CHAIN FINANCE FUNDAMENTALS. Understanding the, Supply Chain Finance Ecosystem, Buyers Suppliers. Improved cash flow Improved cash flow, Stronger supply chain Better visibility into. Optimized working accounts receivable, capital needs Discounted liquidity. Off balance sheet funding, Good quality credit, Reduced payment risk.
Attractive asset pools, To operate effectively supply chain finance requires an ecosystem that improves the velocity. of working capital across a supply chain Participants in the ecosystem are as follows. Buyers Typically large organizations that rely on a multitude of supplier provided goods and. services to deliver products for their customers Buyers often operate on a global basis. Suppliers Companies that supply goods and services to buyers in the supply chain. ecosystem Some suppliers are large enough to also operate as buyers thereby having their. own complex supply chains and the same need to optimize cash flow. Funders B ank and non bank sources of investment capital that advance funds to cover the. cost of approved supplier invoices, Platform providers Technology solution providers that facilitate the supply chain finance. ecosystem and program management Today leading platforms are cloud enabled meaning. they do not require installation and operation of specialty software systems. www primerevenue com 3, SUPPLY CHAIN FINANCE FUNDAMENTALS. Supply Chain, Finance Defined, Supply chain finance also known as supplier finance Supply chain. or reverse factoring is a set of solutions that optimizes. cash flow by allowing buyers to extend supplier payment finance unlocks. terms Increasing the time it takes to pay a supplier. improves several financial metrics e g days payable the cash that s. outstanding or DPO and most importantly frees up, cash that would otherwise be trapped inside the supply hidden in your.
chain A buyer can use increased cash flow to invest. in operational competitive and innovation initiatives supply chain. that will drive additional growth They can also return. cash to shareholders in the form of dividends or stock. repurchases Increasing the time, it takes to pay a. supplier improves, Simultaneously supply chain finance offers suppliers a several financial. way to mitigate the effect of payment term extensions metrics and most. importantly frees, and to accelerate their own cash flow Suppliers who up cash that would. participate in a program have the option to get paid early otherwise be. typically as soon as an invoice has been approved by a trapped inside the. supply chain, buyer The supplier can accelerate payment on some all. or none of their receivables depending on their financial. position and funding requirements For those receivables. that are paid early the supplier will pay a small finance Supply chain. charge or discount finance offers, suppliers a way to.
mitigate the effect, All of this occurs without negatively impacting either of payment term. companies balance sheet Accounting treatment for extensions and to. accelerate their own, supply chain finance when done properly does not count cash flow. as additional debt for a buyer or supplier, Furthermore since the buyer is the obligated party. financing is offered to the supplier at rates that are. typically more favorable because they are based on the. buyer s credit history and rating For many suppliers. this access to a lower cost of funding is exceptionally. Supply chain finance thus creates a win win situation. for both buyers and their suppliers The buyer optimizes. working capital because it has more time to pay suppliers. Meanwhile suppliers can generate additional operating. cash flow by getting paid early without affecting their. balance sheets, www primerevenue com 4, SUPPLY CHAIN FINANCE FUNDAMENTALS. What Supply Chain Finance is Not, The world of trade finance.
is complex and varied, There are numerous ways, to increase business capital. on hand and in many, cases the differences are, slightly nuanced Given. this landscape it s not just, important to understand what supply chain finance is it s also important to understand what it. It is not a loan Supply chain finance is an extension of the buyer s accounts payable and. is not considered financial debt For the supplier it represents a non recourse true sale of. receivables There is no lending on either side of the buyer supplier equation which means. there is no impact to balance sheets, It is not dynamic discounting or an early payment program Early payment programs such. as dynamic discounting are buyer initiated programs where buyers offer suppliers earlier. payments in return for discounts on their invoices Unlike supply chain finance buyers are. seeking to lower their cost of goods not to improve their cash flow Dynamic discounting and. early payment programs often turn out to be expensive for both suppliers who are getting. paid less than agreed upon and buyers who tie up their own cash to fund the programs. It is not factoring Factoring enables a supplier to sell its invoices to a factoring agent in. most cases a financial institution in return for earlier but partial payment Suppliers initiate. the arrangement without the buyer s involvement Thus factoring is typically much more. expensive than buyer initiated supply chain finance Also suppliers trade all or nothing. meaning they have no choice to participate from month to month to the degree that their. cash flow needs dictate Finally most factoring programs are recourse loans meaning if a. supplier has received payment against an invoice that the buyer subsequently does not pay. the lender has recourse to claw back the funds, www primerevenue com 5.
SUPPLY CHAIN FINANCE FUNDAMENTALS, SUPPLY CHAIN FINANCE. How it works, Supply chain finance employs two primary methods The first is the extension of supplier. payment terms In this approach the buyer extends payment terms with all of its suppliers. for example from 60 to 120 days This dramatic slowdown of cash outflow gives the buyer. access to more working capital, The second, tactic in supply. Two primary methods, chain finance is a, counterbalance. to the first The, buyer gives, selected suppliers, the option to.
get paid early, by selling their Buyer extends payment Suppliers get paid early. invoices to financial terms with all suppliers by selling their invoices. institutions or, funders This, offsets the negative impact of longer payment terms on suppliers while still enabling the. buyer to meet its cash flow optimization objectives. Invoice selling or trading is facilitated through a buyer side implementation of a supply chain. finance platform and program In this program buyers identify and invite target suppliers to. participate in the program usually based on the size of spend and or the strategic value of. the supplier Once a supplier accepts the invitation they are onboarded into the program. and its finance team is trained on how to use the processes and tools that will facilitate invoice. trading They are also matched to a funding partner or financial institution. It s important to note the critical role of a strong onboarding program and the availability. of multiple funding sources in this process The onboarding process should be efficient. simple and immediately beneficial to the supplier Furthermore access to multiple financial. institutions ensures that the supply chain finance program is always well funded and suppliers. are partnered with a source that understands the geographical regional and or industry. nuances of their business, www primerevenue com 6, BRIDGES GAP. BETWEEN EARLIER, SUPPLIER PAY DATE, THE SUPPLY CHAIN FINANCE PROCESS. SUPPLIER FUNDER, LATER INVOICE, Following onboarding 3it boils.
4 down to these five, 5 simple steps, INVOICE FUNDER BRIDGES GAP. BETWEEN EARLIER SUPPLIER PAY DATE, LATER INVOICE DUE DATE. SUPPLIER FUNDER BUYER, Supplier Buyer approves Supplier selects Funder receives and Once the invoice. submits an the invoice and invoices for processes request and has matured the. invoice to the uploads it into early payment provides early payment buyer is instructed. buyer following the supply chain from assigned to the supplier The full to pay either the. normal protocol finance platform funder s via sum of the invoice less funder if the. PrimeRevenue s a small financing fee or supplier has sold. supply chain discount is transferred the invoice or the. finance platform electronically to the supplier if they. portal supplier s bank account have not sold the, www primerevenue com 7. SUPPLY CHAIN FINANCE FUNDAMENTALS, THE BENEFITS OF SUPPLY.
CHAIN FINANCE, Supply chain finance is one of the few financial health improvement tactics that works for. organizations on both sides of the supply chain Buying organizations can extend their. payment terms and suppliers can get paid earlier It s a true win win solution for both trading. A meaningful increase in working capital, can be transformative for today s global. supply chains many of which operate, with razor thin margins Whereas. conventional finance tactics may yield, 15M in added cash flow supply chain. finance yields an average of 200M for, large multinational buyers Furthermore.
suppliers also realize substantial gains in, cash flow as they now have the option. to get paid early on each invoice they, submit to the buyer. This working capital can be used by, both buyers and suppliers to fund new. innovation or competitive initiatives It, can be used to weather economic or. industry volatility and protect or grow, margins Money that has traditionally.
been tied up in accounts payable, receivable can now be used to generate. income and gain strategic advantage in the marketplace. Supply chain finance also strengthens supplier health and relationships Not only does it. minimize or negate the impact of extended payment terms but also suppliers can receive. near immediate payment for invoices at an interest rate often many times lower than other. financing approaches This increase in cash flow can protect suppliers which are often more. vulnerable to marketplace dynamics, Growth stability and innovation these are three tenets of a. successful supply chain Supply chain finance is an elegant way. to unlock working capital that serves each of these elements for. buyers and suppliers alike, www primerevenue com 8. About PrimeRevenue, PrimeRevenue is the leader in supply chain finance solutions managing and optimizing. cash flow for more than 20 000 customers in over 70 countries Each year PrimeRevenue. processes more than 100 billion in supplier transactions through its cloud enabled. platform helping companies unlock significant amounts of working capital. SUPPLY CHAIN FINANCE FUNDAMENTALS What It Is What It s Not and How it Works The supply chain ecosystem is a complex one especially for multinational companies that work with suppliers all over the world The health of a global supply chain isn t just measured by revenue and profit A more relevant indicator is how efficiently capital flows between buyers and suppliers Slow moving

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