Unlock working capital and boost competitiveness with supply chain finance software. SCF is also known as reverse factoring and is similar to regular factoring except for one key difference. With SCF, buyers get more time to pay their invoices while suppliers can access funding at lower costs. It’s a mutually beneficial arrangement that improves liquidity without negatively impacting relationships.
Choosing The Right Provider
Supply chain finance software is a powerful financing method that can be used by both buyers and suppliers. It can strengthen buyer-supplier relations and reduce costs. However, it is important to note that SCF should only be utilized by companies with strong credit ratings. Otherwise, it can be detrimental to a company’s financial situation. In a typical SCF arrangement, a business will agree to allow a third party financier to purchase their invoices at a discount in exchange for a fee. This is similar to factoring but differs in one key aspect: the buyer pays their supplier back at a later date, in line with their original payment terms.
As with any new process, implementing SCF requires proper training and documentation. It also helps if the system is integrated with a buyer’s procurement solution so that it can be tracked and monitored. This way, buyers can ensure that the correct information is being used to determine which invoices are approved for funding.
Supply chain finance (SCF) is a way for buyers to offer their suppliers early payment by using third-party funding. The supplier pays a fee to use the service and receives the money upfront. The purchaser then pays the lender at the invoice due date. SCF providers have software programs to help buyers onboard their suppliers to the program. They can manage the onboarding process and lead training to maximize adoption rates. The programs can also provide a central portal for all transaction information.
One example of a company that provides SCF software is Taulia, which was recently acquired by SAP. The solution is fully integrated with SAP Business Network and enables users to automate the payment process between SAP and Taulia, helping to reduce risk and improve working capital. The system also allows for dynamic discounting, enabling companies to offer discounts to all their suppliers. The benefits of SCF for buyers include improved cash flow and stronger relationships with their suppliers.
With its unique, technology-enabled platform, Prime Revenue is an easy, accessible option for companies to use supply chain finance (SCF) and accounts receivable financing. It offers a solution for automating AP processes and reducing manual work, saving money by increasing efficiency. The platform allows for buyer and supplier-specific views of working capital improvement potential, aiding program design and targeting of suppliers. It also facilitates a customized view of invoices to be traded for early payment, resulting in a better experience and more positive outcomes for both sides.
The platform has a bank independent multi-funder structure, and is utilized by many leading buyers. In fact, Global Trade Review named it the winner of the Best contextual banking experience category for 2022. Buyers can set up a program with Prime Revenue in as little as 30-60 days, and they benefit from a centralized administration team and an automated on-boarding process. PrimeRevenue can also provide a comprehensive training and support program for procurement teams to ensure success.
Demica’s platform connects buyers and suppliers to create a new model for working capital finance. It offers buyers a flexible approach to reduce their days payable outstanding while supporting their key supplier relationships. It also helps them drive supply chain performance and lower financing costs. This approach allows for dynamic discounting based on a buyer’s credit quality, which can result in low cost funding and cash flow improvement for the supplier. It can also include trade risk mitigation through cargo, credit, and transaction dispute insurance.
In the past, only large suppliers could benefit from working capital solutions, and trillions of dollars are tied up in accounts receivable each year. But this is changing, as Mastercard now enables small suppliers to access this type of solution through an embedded working capital capability within its Track Business Payment Service multi-rail platform. This provides a simple and easy-to-use experience for suppliers, with one-time enrollment, standard agreements, and seamless integration leveraging partner connections.
One of the complexities of supplier management is remitting payments to a laundry list of companies. If most or all of the company’s suppliers join an SCF program, these payments can be routed to the financer, simplifying AP and reducing related costs.