Taking a holistic approach is part of having a high performance supply chain finance program. Buying on price alone is more expensive in the long run. Therefore, companies greatly benefit when their supply chain becomes a flow where both parties care about success and shared benefits.
Although more than 70% of B2B transactions use credit, many companies still use outdated and misaligned strategies and processes to try to streamline their collections. Financial managers can free up capital that is locked in supply chains with methods that include:
- Use of trade credit
- invoice financing
- Factoring and reverse factoring
- Dynamic discounts, like the ones you can apply with Bancoli
It is important to understand how these strategies work, but it is equally important that they are coordinated with a plan that actually helps to optimize the supply chain.
Elements of a High Performance Supply Chain Finance Program
Freeing up capital trapped in the supply chain should be the primary goal of every CEO and CFO. A high performance program includes the following characteristics:
Company management must consider the entire supply chain, rather than its parts. The goal is to optimize positive and significant cash flow, as well as build greater resilience. By taking advantage of supply chain financing, companies reduce costs. In addition, it facilitates access to new markets, improves cash flow and strengthens supply chains.
Positive relationships with suppliers
By understanding how providers work, your buyers can help them develop and improve their technical knowledge. In this way the needs and potentials for both parts are better aligned. Also, open communication about expectations between both parties is very beneficial.
Advantages of the technology
Data digitization, including electronic invoicing, streamlines the flow of information within the organization and with external partners. Artificial intelligence, use of blockchain, and process automation promote data integrity and make processes faster, easier, and more transparent.
Integration of existing processes
Digitizing information and exchanging electronic data vertically and horizontally throughout the supply chain increases efficiency, reduces errors, and promotes positive relationships.
Transparency is key to a high performance supply chain
Supply chain transparency, the disclosure of data to participants in a supply chain, has been a relatively new development over the past twenty years. Consumers and stakeholders demand information on ingredients and materials, location and manufacturing methods, and working conditions. Supply chain visibility is not only a necessary strategy but an opportunity. Its implementation not only contributes to achieving greater efficiency, but also opens the doors to new markets.
Previously, a supply chain consisted of sequentially connected links. Today, most companies have ever-expanding complex and dynamic systems of interrelated suppliers and customers. Adopting a “supply network” mentality will be critical for future management.
In the new global economy, where supplier lists can include hundreds of companies around the world, supply chain finance will only grow in importance. Your goal should be to become a reliable source of funding for organizations to grow, compete and innovate.
What are the practices that you can most easily implement to increase cash flow in your business? Paying attention to this and considering how to include all the relevant ones will be essential to increase your liquidity on a sustained basis.