How Supply Chain Financing Can Benefit Your Business and Suppliers.pptx

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Supply chain financing is a type of financing that involves a third party, usually a bank or a financial institution, that provides liquidity to both buyers and suppliers in a supply chain. Supply chain financing, also known as reverse factoring, helps businesses improve their cash flow by letting them pay their suppliers over a longer period of time, while giving their large and small suppliers the option to get paid early.

Economy & Finance

How Supply Chain
Financing Can Benefit
Your Business and
Suppliers

Introduction
Supply chain financing is a type of financing that involves a
third party, usually a bank or a financial institution, that
provides liquidity to both buyers and suppliers in a supply
chain. Supply chain financing, also known as reverse
factoring, helps businesses improve their cash flow by letting
them pay their suppliers over a longer period of time, while
giving their large and small suppliers the option to get paid
early.

How does supply chain financing work?
Supply chain financing works as follows:
 A buyer places an order with a supplier and agrees on the payment
terms, such as 60 or 90 days.
 The supplier delivers the goods or services to the buyer and issues an
invoice.
 The buyer approves the invoice and sends it to the financier, who verifies
it and offers to pay the supplier immediately at a discount.
 The supplier can choose to accept the offer and receive the payment
minus the discount, or wait until the due date and receive the full
payment from the buyer.
 The buyer pays the financier the full invoice amount on the due date.

What are the benefits of supply chain financing?
Supply chain financing can offer many benefits for both buyers and suppliers, such as:
 Improved cash flow: Buyers can extend their payment terms and optimize their working
capital, while suppliers can access immediate cash and reduce their days sales
outstanding (DSO).
 Reduced costs: Buyers can negotiate better prices or discounts from their suppliers, while
suppliers can lower their financing costs and avoid late payment fees or penalties.
 Enhanced relationships: Buyers can strengthen their relationships with their suppliers by
offering them flexible payment options and improving their cash flow. Suppliers can
increase their loyalty and trust with their buyers by delivering on time and meeting their
quality standards.
 Increased efficiency: Buyers and suppliers can streamline their invoice processing and
payment transactions by using technology-based solutions that automate and track the
supply chain financing process. They can also reduce errors, frauds, or disputes by using
verified invoices and payments.

Conclusion
Supply chain financing is a win-win solution for both
buyers and suppliers in a supply chain. By using a
third party financier, buyers can improve their cash
flow and reduce their costs, while suppliers can
access immediate cash and enhance their
relationships. Supply chain financing also increases
efficiency and transparency in the invoice processing
and payment transactions.

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