Corporates often have competing financing interests with the suppliers and customers in their supply chain. Corporates want to pay their suppliers as late as possible and suppliers want to be paid as early as possible. On the flip side, corporates want to get paid from their customers as soon as possible while their customers want to hold onto their cash for longer.
Many companies have leveraged these competing financial interests by using terms of sales to gain a competitive advantage. Offering shorter payment terms for suppliers and longer terms of sales for customers are common ways that corporates can outperform market rivals.
Trade Receivables Securitisation (TRS) is a financing solution that has been used by the largest multinationals to extend terms to their customers. The related receivables are then sold to a funder on a true-sale basis. The solution is aimed at increasing sales and unlocking liquidity in a balance sheet efficient way.
Once solely reserved for the largest multinationals, advances in technology and the emergence of third-party specialists, like Finvex.tech, has meant companies of smaller sizes and in a variety of sectors can now take advantage of the benefits of securitisation. A combination of industry-specific challenges and a macro-economic trend to offer longer sales terms to strategic customers and shorter payment terms to key suppliers, means that the timing of this advance couldn’t come sooner for the middle market.
Finvex.techs TRS solution has made it possible for middle market companies to extend terms as a means of winning and retaining key customers. When properly structured and implemented, securitisation also provides a way for companies to diversify their funding sources via accessing the capital markets. What’s more, that funding typically comes at very competitive rates compared to other forms of debt.
In a related trend, the middle market has also started to leverage their accounts payables as a way of creating economic value in their supply chains. Accounts payable, or amounts due to suppliers for goods or services received that have not yet been paid, are typically viewed as a cost centre.
Our Supply Chain Finance (SCF) solution gives companies the ability to generate revenue from their accounts payable by monetising key relationships with their suppliers. Companies can release liquidity to their suppliers, who can choose to take early payment in return for a discount. The company maximizes savings from early payment discounts which improves their overall profitability.
Finxex.tech scalable technology is central to establishing a successful Supply Chain Finance or TRS program. Our easy-to-use platform and mobile app transforms outdated ways of running working capital programs. What was once a manual and paper-intensive process has now been fully automated.
We use secure API connections to automatically synchronise invoice and payment data, and handle all reconciliation work. We also bring product expertise and key services such as supplier on-boarding, program design and working capital analysis. This provides a distinct advantage in helping clients of all sizes, but in particular the middle market, realise the advantages of TRS and SCF programs.
Speak to us today to find out more about setting up your own financing program with Finvex.tech.