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We Know Where the Material Is, But … Where's the Payment?

Advanced supply chains of today connect buyers and sellers in a digital manner for their order and shipments. Often the benefits of rigorous procurement policies between trading partners are ignored with pricing discounts, service levels and rigorous procurement protocols disregarded in an effort to just "get the business done." The buyer may get the raw materials ordered, but the products aren't of the typical quality at the right price. Communication and collaboration are lacking. -David Cahn, Director Product Marketing, Elemica

We Know Where the Material Is, But … Where's the Payment?

A digital supply network integrates the entire payables and collection process for trading partners, resulting in:

  • A streamlined and simplified order-to-cash continuum
  • Slashing of errors, time and cost
  • Captured discounts and expanded supplier payment methods

Supply chain business-to-business (B2B) networks provide trading partners with very detailed information on where orders, shipments and materials are located for customer delivery. Buyers and sellers benefit from fewer order and shipment errors on the buy and sell side of the equation, streamlining order processing, and gaining visibility into delivery schedules. The same level of material flow visibility is not shared on the status of the payment process, causing significant benefits to be missed relative to the cash-to-cash cycles for a company’s working capital management.

In a recent study of over 650 suppliers, only 23 percent had integrated Accounts Receivable invoicing with their trading partners’ accounts payable processes. Of the ones that had integrated, significant savings in payment cycles, reconciliation processes, and payment discounts were realized. This does not include the qualitative aspects of better partner relationships. So why are more companies not integrating the cash-to-cash cycle of the business with trading partners?

Business networks make it easier than ever before to integrate payments, collections and even obtain payment information from working with trading partners’ banks. Sending invoices that are “approved to pay” with digital signals is actually no different than sending an advanced shipment notice. Integrating payments from trading partners’ banks additionally streamlines the match between payments and invoices as a result.

On a broader level, it is a win-win for both parties. Buyers of products and services can obtain more discounts by paying approved invoices quicker while suppliers benefit from the obvious quicker collection period. When viewing the historical supplier delivery and product quality performance from the network, algorithms can be used to obtain supplier ratings. These ratings can be capitalized by the supplier to propose earlier payments from other customers on the network and to win new customers.

Improving cash-to-cash performance often rests on a company’s ability to influence their customers’ timing and mode of payment outside the four walls of a given supplier. By contrast, procure-to-pay processes are more amenable to internal attention and control. Furthermore, inventory-related performance has been broadly supported in recent years by advances in predictive analytics and other technology improvements.

The Outlook

In the future, the digital supply chain will extend beyond procurement and logistics operations to inventory, improving order-to-cash cycle times for working capital improvement. Many executives view working capital improvement as essential to their companies’ growth plans over the next year. Linking these material supply chain initiatives with supply chain finance challenges through enabling technologies can in turn transition a provider of services to a partnership.

A digital supply network integrates the entire payables and collection process for trading partners, resulting in:

  • A streamlined and simplified order-to-cash continuum
  • Slashing of errors, time and cost
  • Captured discounts and expanded supplier payment methods

Supply chain business-to-business (B2B) networks provide trading partners with very detailed information on where orders, shipments and materials are located for customer delivery. Buyers and sellers benefit from fewer order and shipment errors on the buy and sell side of the equation, streamlining order processing, and gaining visibility into delivery schedules. The same level of material flow visibility is not shared on the status of the payment process, causing significant benefits to be missed relative to the cash-to-cash cycles for a company’s working capital management.

In a recent study of over 650 suppliers, only 23 percent had integrated Accounts Receivable invoicing with their trading partners’ accounts payable processes. Of the ones that had integrated, significant savings in payment cycles, reconciliation processes, and payment discounts were realized. This does not include the qualitative aspects of better partner relationships. So why are more companies not integrating the cash-to-cash cycle of the business with trading partners?

Business networks make it easier than ever before to integrate payments, collections and even obtain payment information from working with trading partners’ banks. Sending invoices that are “approved to pay” with digital signals is actually no different than sending an advanced shipment notice. Integrating payments from trading partners’ banks additionally streamlines the match between payments and invoices as a result.

On a broader level, it is a win-win for both parties. Buyers of products and services can obtain more discounts by paying approved invoices quicker while suppliers benefit from the obvious quicker collection period. When viewing the historical supplier delivery and product quality performance from the network, algorithms can be used to obtain supplier ratings. These ratings can be capitalized by the supplier to propose earlier payments from other customers on the network and to win new customers.

Improving cash-to-cash performance often rests on a company’s ability to influence their customers’ timing and mode of payment outside the four walls of a given supplier. By contrast, procure-to-pay processes are more amenable to internal attention and control. Furthermore, inventory-related performance has been broadly supported in recent years by advances in predictive analytics and other technology improvements.

The Outlook

In the future, the digital supply chain will extend beyond procurement and logistics operations to inventory, improving order-to-cash cycle times for working capital improvement. Many executives view working capital improvement as essential to their companies’ growth plans over the next year. Linking these material supply chain initiatives with supply chain finance challenges through enabling technologies can in turn transition a provider of services to a partnership.

We Know Where the Material Is, But … Where's the Payment?