Moving Treasury from Cost to Profit Center with Supply Chain Finance

Moving Treasury from Cost to Profit Center with Supply Chain Finance

Powered by AITE Group

Enrico Camerinelli, Senior Analyst, Aite Group

Abhinav Saigal, Director of Supply Chain Finance, Kyriba

July 11, 2013

© 2013 Kyriba Corporation. All rights reserved. 2PRIVILEGED & CONFIDENTIAL.

What is Supply Chain Finance?

• SCF is defined as:

“the use of financial instruments, practices, and technologies to optimize the management of the working capital and liquidity tied up in supply chain processes for collaborating business partners.”


• Survey findings snapshot

• Importance of SCF solutions as a critical tool for corporate customers

• SCF solutions


Survey Findings


Survey Findings


Survey Findings


Importance of Supply Chain Finance

• CFO and Treasurer can employ variety of supply chain finance techniques to:- Help the company meet its working capital objectives

- Provide liquidity to the supply chain

- Manage counterparty risk

• Two solutions gaining traction in the buyer-led SCF space- Dynamic Discounting/Dynamic Payment Terms

- Payable Financing/Reverse Factoring


Supply Chain Finance

Details of Dynamic Discounting

• Buyer sets and offers dynamic payment terms to its suppliers• Allows suppliers to control payment timing and manage their cash

flows• Opportunity for buyer to earn discounts on its entire spend, not just

pre negotiated discount terms from a small percentage of suppliers

A win-win for supplier and buyer


Benefits – Dynamic Discounting

Supplier

In control of payment receipt, can request payment at any point of invoice term, depending on working capital needs

Alternate source of working capital finance

Visibility of approved invoices and payments to better manage working capital needs

Buyer

A valuable tool for cash optimization - Alternative for investing short term excess liquidity

Earn above market, risk free returns on annual spend by paying suppliers in advance

Minimize counterparty risk from improved financial health through the supply chain


Functional Workflow - Dynamic Discounting

1. Purchase order

�

2. Delivery3. InvoiceBuyer Suppliers

�

8. Payment of non-discounted invoices at maturity

4. Approved invoices

6. Request for early payment

7. Early payment

Supply Chain

Finance Platform

5. Dynamic payment discount offer


Supply Chain Finance

Details of Payables Financing (aka Reverse Factoring)

• Bank discounts invoices Buyer has approved for payment

• Bank pays supplier early

• On due date of invoice Buyer pays the bank full value of invoice

A win-win-win for Supplier, Buyer, Bank


Benefits – Payable Financing

Supplier

Receive payments for 100% of invoice value, less any financing charges

Reduce DSO

Opportunity to discount receivables at a better rate than other trade finance options by leveraging buyer’s credit

Buyer

Keep or extend payment terms without negatively impacting Supplier’s cash flow

Manage DPO metrics to enhance working capital

Minimize counterparty risk from improved financial health through the supply chain


Functional Workflow - Payable Financing

1. Purchase order

�

2. Delivery3. InvoiceBuyer Suppliers

6. Notification of available financing

7. Request for financing

8. Financing payment

�

Banks

Supply Chain

Finance Platform

9. Payment of financed invoices at maturity

4. Approved Invoices

5. A

vaila

ble

Fina

ncin

g


• The Treasurer’s expanding tool box


Growing presence of SCF in the Treasurers’ tool box


• SCF technology for Treasurers


Technology ObjectivesIntegrated SCF solutions in TMS must have the following requirements:

1) Bank agnostic/Multi-Bank2) Reverse Factoring and Dynamic Discounting on the same

platform3) Global reach4) SaaS solution5) Ease of use (including for suppliers)6) Automation

Supply Chain Finance Technology


Technology Objectives1) Bank Agnostic/Multi-Bank

Flexibility and neutrality from bank platforms Many banks may not individually be able to support financing

needs of the program Enables utilization of banks with strengths in regions Should be as easy to connect to multiple banks as to one bank



Technology Objectives2) Reverse Factoring and Dynamic Discounting on one platform

Visibility to cash and cash forecasts Flexibility to utilize both solutions as business needs demand



Technology Objectives3) Global Reach

Technology should facilitate program’s geographic reach• Supply Chains are global; so should the Supply Chain Finance programs

Technology support for the Buyer and Suppliers is critical• Multi-currency• Multi-geography• Multiple time zones



Technology Objectives3) SaaS Solution

Access by all parties Minimized support Eliminates IT involvement Improves ability to distribute key information and reporting



Technology Objectives4) Ease of Use

Supplier ease of use absolute necessity -> encourages supplier participation

Examples of ease of use:• Minimal mouse clicks• Intuitive interface • Structured workflow


Less training required


Technology Objectives5) Automation

Goal is to improve productivity to ‘create time’

Delivers visibility of invoices and process to buyer, suppliers, and banks

-Timeliness is key to success of a program-Straight through processing (STP) includes ERP integration

Without automation, likely not possible to manage the program -Never mind the team’s scalability to achieve global benefits



Wrap-up

SCF solutions are not a banking tool Surveyed level of adoption of reverse factoring and dynamic discounting demonstrates

the need of buy in by corporate treasurer

There are many key internal and external stake holders that influence supply chain finance programs• Within an organization Treasury, Procurement, and Accounts Payable, as well as

Suppliers and Banks, are all key stakeholders in a supply chain finance program

Successfully implemented supply chain finance programs provide many benefits• Improved Working Capital, better returns on excess cash/liquidity, Risk Management are

some of the core benefits


White paper

Download our complimentary white paper “Treasury Management Systems & Supply Chain Finance” to learn more at:

http://bit.ly/kyribaSCF


Contact usContact Kyriba:

Contact AITE:

[email protected]

twitter.com/kyribacorp

kyriba.com

linkedin.com/company/kyriba-corporation

kyriba.com/blog

[email protected]

twitter.com/aitegroup

aitegroup.com

aitegroupblog.com

The recording of the live webcast is now available on-demand. Play back here: http://goo.gl/LluPV

Thank you!

http://goo.gl/LluPV

http://goo.gl/LluPV

Date post:	13-Sep-2014
Category:	Economy & Finance
View:	1,192 times
Download:	3 times

Moving Treasury from Cost to Profit Center with Supply Chain Finance

Economy & Finance