Supply Chain Finance and the Benefits of Dematerialisation

A treasurer’s task has long been affected by speed and reliability. Theiur actions are dependent on the information made available by different layers of the organisation. Often, information on invoices to be paid was concurrent with their due date, making cash forecasting difficult.

Treasurers can now, however, use dematerialised supply chain finance (SCF) initiatives and technology to obtain digitised information for the procure-to-pay (P2P)  processes and, at each individual stage, filter in or out specific information being looked for.

While software vendors have made bespoke SCF technology available to corporates, products originating from banks or bank-owned software providers may not be as pertinent to a corporate treasury’s needs. Fully dematerialised SCF comes from software providers with the corporate’s interests at heart. Their solutions should encompass all stages of the varied P2P cycles, presenting opportunities to run flexible and predictive SCF initiatives. To cite just one benefit, it should allow for financing purchase orders (POs) for suppliers with a justifiable need.

As for suppliers, SCF technology provides them with visibility and enables them to forecast, acknowledge disputes and manage early payment requests. SCF dematerialisation technology provides treasurer-enhanced visibility of all internal processes, before inviting banks to participate and address part or total early payment demands. In addition, corporates’ SCF technology allows for multi-bank participation while banks’ SCF solutions often only permit a single funding operator.

Dematerialisation technology has reduced the amount of data manually keyed into systems. From procurement, with accurate pricing when ordering goods, to entering invoice data, the number of errors has reduced considerably. Enhanced processes are also due to the speed at which the powerful computing software now available can function. These two elements combined allow for the treatment of more detailed information in far greater volumes.

Better Understanding

For a treasurer, SCF is an opportunity to bring together all the internal players, from logistics to procurement, accounts payable (A/P) and, naturally, the treasury. These are often departments that do not work well together, so sitting around a table to discuss each party’s involvement in the PTP process, can only result in an improved understanding.

Moreover, corporates taking control of SCF solutions have the opportunity to rid themselves of the negative image often associated with over-severe handling of their suppliers, especially smaller suppliers, should they choose to do so. 

As many corporates face interruption in their supply chain, owing to slow deliveries and/or supplier receivership, securing the physical and financial supply chain has become an important element of corporates’ business continuity. The first tangible step must be to question suppliers about their needs. Often slow to respond and dubious of their clients’ motivation, due to it habitually being related to obtaining improved terms, many suppliers have resorted to expensive confidential factoring in order to mask their financial frailty from their corporate clients.  With a better grasp of their company’s intricate supply chain links, treasurers are now endeavouring to build SCF initiatives to alleviate and stabilise their suppliers’ financial uncertainty, thus securing their sales revenue, and embedding them in the chain.

Cost Reductions

Having fewer people involved in manual error-prone tasks obviously reduces costs. There is ample information at hand to indicate the level of cost reduction when launching individual SCF projects such as electronic procurement (e-procurement), electronic invoicing (e-invoicing) and electronic remittance (e-remittance) advices. Dematerialised SCF technology and procedures combine all of these elements, opening up potentially major cost reductions from all-in-one programmes.

Any treasurer who considers SCF as an initiative merely serving its cash objectives should think twice. Besides faster and more reliable processes, a better understanding of the company’s dynamics, cost reductions and image enhancer, SCF can also be a profit earner. Participating banks should propose a commission scheme for their participation, and it represents a great scheme for them. Accurate data processing, informative relationships between the corporate and its suppliers, dematerialised data delivered to the bank and sometimes supplier on-boarding to the SCF programme managed by the corporate, all contribute benefits. Financial organisations would therefore pay a remuneration based on their profits – a fair enough requirement.



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