Executive Briefings

Supply Chain Finance, Working Capital Reduction Have Quite Different Results

Many European companies are working hard to solve their "captive cash" problem, improve their cash-to-cash cycle, and manage their financial and supply chain risk across complex markets and supplier agreements. But the two primary approaches they take - supply chain finance and working capital reduction - result in very different supply chain outcomes.

Supply Chain Finance, Working Capital Reduction Have Quite Different Results

Supply chain financing helps firms help their credit-worthy suppliers finance receivables more easily at a more attractive interest rate. Historically funded and managed by a bank, supply chain finance now also employs a battery of technologies/platforms and financial business practices that enable discounting of accounts receivable and financing of confirmed accounts payable.

How effective will a supply chain finance initiative be in your firm's efforts to free up working capital? Your success will depend on elements including the difference between your firm's credit rating and those of your onboarding suppliers, your current and target payment terms, the scope of your onboarding suppliers and the related value stream and the lead time of your approval process.

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Supply chain financing helps firms help their credit-worthy suppliers finance receivables more easily at a more attractive interest rate. Historically funded and managed by a bank, supply chain finance now also employs a battery of technologies/platforms and financial business practices that enable discounting of accounts receivable and financing of confirmed accounts payable.

How effective will a supply chain finance initiative be in your firm's efforts to free up working capital? Your success will depend on elements including the difference between your firm's credit rating and those of your onboarding suppliers, your current and target payment terms, the scope of your onboarding suppliers and the related value stream and the lead time of your approval process.

Read Full Article

Supply Chain Finance, Working Capital Reduction Have Quite Different Results