Supply Chain Finance

Collaboration - Why Supply Chain Finance is NOT ‘Invoice Finance’

When we talk to the Finance Director of a potential client about how they could use Supply Chain Finance (SCF) to enhance their own working capital; a response we often hear is “isn’t that just debt factoring?”. Well, no, and technical arguments aside, there is one very big difference. Collaboration.

Excellent companies collaborate with their suppliers in many ways, from product design to marketing and from demand planning to integrated logistics and stock information. So, why not collaborate in supply chain finance? By working with both the buyer and the supplier we can eliminate many of the issues that increase the cost and hassle of Invoice Financing.

The financier’s risk of invoice fraud, contract disputes and supplier failure can be eliminated. Supplier’s cash flow peaks can be smoothed and their credit insurance expenses reduced. In short, a very real constraint and a significant cost can be removed from your supply chain. With supply chain finance, the supplier views the status of their invoices in BridgeIT , our online payment platform, and as soon as their buyer has approved the invoice it can be requested for immediate settlement.

We advance 100% of the invoice value and suppliers pay the small transaction and finance fee only if they use the service (two other big differences between SCF and most invoice finance). So, how does this help a buyer increase their working capital? Simple. As with the more traditional ways of collaborating, benefits to one supply chain partner can be shared.

Some buyers take their share by extending payment terms, others by taking up existing early payment discounts and some by using the programme to reward supplier behaviour. Invoice Finance has developed as an often invasive, unpopular and expensive form of finance because of the adversarial manner in which many buyers and suppliers work in the financial side of their supply chain. Cooperate and you can remove real costs from your supply chain and set free your trusted suppliers to grow with you.

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Mark Coxhead
CEO
Woodsford TradeBridge