Invoice Finance - Strengthening the Corporate Supply Chain

February 09, 2016

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With the increase in alternative finance options available to businesses across Australia, invoice finance could easily be misconstrued as only benefiting small to medium sized businesses. Big business can benefit too.

Invoice finance that is made available to a large corporate’s supply chain is known as supply chain finance, or reverse invoice finance. This allows corporates to lengthen their payment terms to their suppliers whilst providing the option for their suppliers to get paid early.

Supply chain finance can be highly advantageous for both parties. Large corporates can position themselves as a business partner of choice for their suppliers, who benefit from a working capital boost.

So let’s look at why a corporate would want to roll out this facility across their supply chain:

  • It’s FREE – not many things in business are free, but for corporates this does not cost anything. If suppliers choose to use the facility, they pay a small fee.
  • Improve efficiency – payment processing within a corporate is often complex and can take in excess of 30 days. Arrangements with suppliers on bespoke terms can further reduce internal efficiency. By offering supply chain finance, corporates empower suppliers to manage their working capital requirements, without adding to the internal administrative burden.
  • Support your suppliers – supply chain finance provides a fast solution to cash flow issues. As soon as you have confirmed an invoice, suppliers have the ability to get the cash advanced by leveraging the credit rating of your business to strengthen theirs.
  • Strengthen the supply chain – enable your suppliers to have a healthy cash flow, strengthening the whole supply chain. This reduces the likelihood of suppliers winding up operations, declining requests for increased demand and promotes longevity of the relationship.
  • Payment term flexibility – extend payment terms without jeopardising the supply chain.

 

Supply chain finance diagram:

supply chain finance

 

As a supplier, why would this be beneficial to you?

  • Get paid as soon as you invoice - No need to offer discounts to a corporate as an incentive to see your money sooner. You can access finance, as and when you need it.
  • Competitive cost of finance – You have access to a rate of finance that is not directly linked to your own credit rating. By leveraging supply chain finance, you can access the money tied up in your invoices at a lower rate of finance.
  • Reliable cash flow – Provides predictability and certainty around cash flow.
  • Love the service? Use it for your other invoices! - Invoice finance is not limited to your supply chain finance facility. You may be eligible to finance your other invoices as well.

 To learn more about invoice or supply chain finance, contact us and the team can help you manage your cashflow.

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