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Trends to watch for in supplier finance

April 9th, 2021

There is no doubt that as markets begin to reopen, and business returns to something more akin to normal, focus has been placed firmly on the issues of supply chain disruption, cost control and payments.

It is this last issue that dominates the thinking of many suppliers as debtor days lengthen and payment terms are stretched to breaking point. But there is a solution to cashflow woes: supplier finance.

However, finance professionals need to be prepared for the unexpected and 2021 is no exception with a number of trends you probably need to get to grips with.

Risk exposed

The pandemic has highlighted supply chain risk like never before as organisations struggled with supply-chain disruption.

According to a report from Resilience360 and Business Continuity Institute, 73% of companies experienced a detrimental supply-side disruption as a result of the coronavirus pandemic, and 40% plan to perform greater due diligence moving forward.

Given the disruption to goods it therefore follows that there will have been major disruption to payments throughout the value chain. Late payments, extended terms and non-payment all added to the woes of business struggling with cashflow.

This is where supplier finance can add real benefits to suppliers as goods produced are paid for by a finance company from buyer accepted invoices.

Going green

For many industries, going green is no longer a choice. Through a mix of government targets and a more environmentally conscious consumer, the pressure is on all departments to find sensible ways to become greener.

Within the finance supply chain, paper is clearly an issue, particularly for invoices. Paper invoicing has consequences far beyond just inefficiencies and higher processing costs. By switching to electronic invoicing and payments, and automating other processes in the financial supply chain, an organisation will reduce paper and CO2 emissions.

Supplier finance can help here too through effective support for e-invoicing and payment automation.

More regulation

Business has seen an increase in government standards when it comes to invoice receiving, processing and archival – India and Germany are good examples of this. And this is something we can expect more of as more and more governments jump on the e-invoicing bandwagon.

Why would this matter – one word compliance – because the penalties for non-compliance can be severe. Global finance and invoicing is a complicated creature and you simply cannot treat compliance as an afterthought.

Remote working

The immediate shift to working from home left many finance departments unprepared, causing major business disruptions in their operations. Working remotely will be the new normal, with 52% of organisations stating that they plan to make remote work a permanent option for the roles that allow it, according to the PwC Global CFO Pulse Survey.

With software-as-a-service (SaaS) solutions, which seamlessly integrate with ERP and back-end systems, the only technology that employees need to do their jobs is an internet connection and web browser. Finance teams have therefore been able to continue operating from wherever they are, ensuring there are minimal disruptions to the flow of goods, services, and money.

Suppliers’ finance departments grappling with the short-term disruption of the Covid pandemic have clearly faced considerable pressure over the past year. Change is a constant and the digital transformation revolution is now well underway. But this is not the only challenge they face as they focus on cashflow.

Supplier finance – with its ability to fund through forward paying on agreed invoices – could well make the transition and the challenges of 2021 that bit easier to handle.

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