Working Capital

Supply Chain Finance Takes Off

Companies aim to give their suppliers a boost at the same time they extend payment terms.

More and more companies are signing on for supply chain finance. The financial crisis is credited with encouraging companies to find ways to balance their need to take longer to pay their bills with their suppliers’ need for cash, but the interest continues to grow even as the economy slowly picks up steam.

“One of the things we’re really seen take off over the last couple of years is supply chain finance,” said Michael Fossaceca, managing director and North America region head corporates for Citi Treasury and Trade Solutions.

But this is supply chain finance with a twist. “Years ago, supply chain finance was about extending [days payable outstanding],” Fossaceca said. Now, “many of the clients are using it more around the health of the supply chain. It’s become a really critical tool.”

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By : admin /September 18, 2014 /Working Capital /0 Comment / Read More

Six Ways to Stretch Your Payment Terms

When it comes to working capital improvements, accounts payable may yield an abundant crop of low-hanging fruit.

Faced with cash calls from their banks and creditors in the wake of the financial meltdown, many companies sought to squeeze funds out of their working capital. They did so by going after customers who owed them money, cutting down on the costs associated with inventory, and increasing their days payable outstanding.

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By : admin /September 13, 2014 /Working Capital /0 Comment / Read More

Russia’s very first online receivables auction platform has gone live

invoice-market.ru is the first funding portal of its kind in the country, allowing businesses to select the most advantageous working capital proposal from potential buyers. While these alternative platforms are already flourishing in other mature markets, the performance of invoice-market.ru in Russia will be closely monitored – success here would reinforce the potential of invoice platforms as globally adaptable funding options.

By : admin /September 13, 2014 /Working Capital /0 Comment / Read More

How Supply Chain Financing Is Changing Buyer-Supplier Relationships

Prominent business and supply chain analyst Jon Hansen says when buyers try to improve working capital position at the expense of suppliers, bad things happen usually. Supply chain financing is a tool that mutually benefits the positions of both stakeholders, creating win-win buyer-supplier situations.

Back in May I read a post by Eyal Rosenberg, CEO of payment automation software maker Nipendo, who made reference to an auto industry survey that highlighted the importance of supplier liquidity, including the negative impact that a slow payment process has on the buyer supplier relationship. Specifically, Rosenberg pointed to the finding that automakers “that maintain positive relationships with suppliers tend to offer the best products at affordable prices.”

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By : admin /September 06, 2014 /Working Capital /0 Comment / Read More

Factoring gets new life with growth in Cross Border Open account trade

I have written a few pieces around Factoring over the last few months and certainly while B2B and Supplier Networks are booming in the news, factoring growth continues to churn along at a pretty good clip. While the model is labor intensive and seller focused, and typically supports those industries with high labor intensity (ie, apparel and textiles), the growth would be the envy of B2B companies.

Some of the key findings from Factors Chain International 2013 worldwide factoring report:

  • The world factoring market turnover was US $ 3.07 trillion, with domestic factoring accounted for 82 per cent of the total.
  • Cross border factoring has grown at twice the rate of domestic factoring over a five year time horizon (25% vs. 13% for domestic). Part of the increase in cross border factoring is due to the explosion in open account trade, and part due to new emerging markets opening up.
  • China is the largest factoring market in the world today and is increasing at a rate of 54% per annum. It accounts for over 20% of the global cross border factoring volume today!
  • From a regional perspective, Europe is the largest factoring market in the world, accounting for 60% of the world total

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By : admin /August 23, 2014 /Working Capital /0 Comment / Read More

Seven quick facts on Supply Chain Finance programs

I recently had a few discussions with corporates who have rolled out Supply Chain Finance (or Approved Trade Payable) programs with their supplier base. These corporates have been running programs for several years so I thought it would be good to get some feedback on how the programs are progressing.

Here are 7 quick facts that seem to be consistent with programs:

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By : admin /August 23, 2014 /Working Capital /0 Comment / Read More

Payments as a Working Capital Tool

A lesson learned from the global financial crises was how critical free cash flow can be for corporates, their customers, and their suppliers. As businesses seek to unlock cash flow from day-to-day operations, savvy treasurers have discovered vendor payments as a means to extend payment terms while improving vendor health, writes Chris Bozek, Managing Director, Head of Global Trade and Supply Chain Products Bank of America Merrill Lynch.

The benefits of optimising the Cash Conversion Cycle (Days Sales Outstanding + Days Inventory Outstanding – Days Payment Outstanding), have, in theory, held great promise in improving both the income statement and balance sheet. Here, we outline a three-step roadmap that turns the theory into an action plan, with the goal of unlocking hidden cash while not increasing bank debt through the power of payments.

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By : admin /August 23, 2014 /Working Capital /0 Comment / Read More

PayCargo Ramps Up PayCargo Credit Program & Supply Chain Finance More than $250 Million to Lend to Small and Mid Sized Shippers via the PayCargo Platform

PayCargo LLC, a provider of innovative electronic invoicing and settlement solutions for the shipping industry for more than 10 years, today announced that it has brought back its highly successful PayCargo Credit Program. PayCargo provides a global, online freight payment system that allows shippers, carriers and freight brokers of all sizes to settle accounts faster and more safely than ever before.

Since being spun out of a major financial services company earlier this year, PayCargo has been expanding into other transportation segments such as air cargo, trucking, rail, and warehousing. As part of its expansion, PayCargo has arranged funding of the credit facilities it offers its clients.

PayCargo can now offer very competitive financing options. Through PayCargo’s state-of-the-art, supply chain finance technology platform, carriers can enjoy advanced funding of receivables and shippers can qualify for additional credit terms on their payables.

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By : admin /August 23, 2014 /Working Capital /0 Comment / Read More

Another attempt to define Supply Chain Finance

I have to applaud the International Chamber of Commerce. In their recent meeting in Dubai, they formed a Global Supply Chain Finance (SCF) Forum to clarify existing definitions around supply chain finance terminology. The effort will encompass five organizations: Euro-Banking Association (EBA), Bankers Association for Finance and Trade (BAFT), Factors Chain International (FCI), International Factors Group (IFG) and the International Forfaiting Association (IFA).

Kah Chye Tan, Chair of the ICC Banking Commission said: “SCF is a growing market with considerable business opportunities identified for the near future. Given increased collaboration among the wide range of bank and non-bank representatives facilitating domestic and cross border trade, and the advent of Internet and new communication technologies, it is more important than ever before for all market participants to adopt universally-accepted terminology that corresponds to the rich array of processing, financing and risk management techniques currently being developed by the industry to support increasingly globalized supply chains.”

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By : admin /August 23, 2014 /Working Capital /0 Comment / Read More

Efficient Financing Options Help Enhance Factory Standards in Emerging Markets

The financial supply chain needs more attention than it usually gets. Traditionally, the focus of supply chain management is on the movement of finished goods and raw materials across the value chain. But companies also need to pay attention to the flow of money. The movement of money happens in the form of bank credits or with the help of other financial institutions. Often these methods do not work well for medium to small suppliers who frequently are cash constrained and need to free up their working capital more quickly. There are solutions available in the market to facilitate credit retrieval, but banks are financing the receivables of small suppliers, which involves risk and requires the banks to investigate the relationships between buyers and the suppliers (their customers) in those chains. This drives up the fees paid by small suppliers. Another major issue with small and medium enterprises in emerging regions is the cost of capital.

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By : admin /August 23, 2014 /Working Capital /0 Comment / Read More