The evolution of supplier financing

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Recap from the ACT Working Capital Conference by Andrew Burns, C2FO Business Director

C2FO sponsored the Association of Corporate Treasurers’ inaugural conference on Working Capital in London on September 15, 2015. There were close to 300 attendees from companies like Marks & Spencer, SABMiller, Shell and John Lewis. We had our own plenary session in front of the whole conference with the title of ‘Building the perfect SCF model: creating a win-win-win for trading partnerships.’

We were joined on stage by Jason Bristow, former VP and Treasurer of Amazon, to explain the buyer side of the C2FO working capital market. We told the story of the evolution of supplier financing from SCF to buyer push models to the more efficient market-based acceleration which resonated well with the audience. Jason brought the C2FO message across very effectively, saying that C2FO’s ease of use, low risk and quick implementation make it a no-brainer given the P&L benefit it represents.

The opening speaker from the main sponsor, Royal Bank of Scotland, said that there are lots of advances in innovation in the field of SCF – in fact, they had a team locked away for three months working on it. He continued, “However, if you want to learn about dynamic discounting innovation, go speak with C2FO.”

We had a significant amount of conversations from both sides of the working capital equation: businesses wanting more cash through working capital initiatives and large corporates wanting to put their cash to better use.

At the beginning of the conference, there was a poll conducted to understand the working capital needs of businesses. The main three areas of interest were:

1. Risk management – Reducing liquidity risk, 2. Balance sheet optimization – Generation of cash, and 3. P&L impact – Creating margin improvement

A lot of discussions started with companies wanting to improve their cash levels but then progressed into the overall P&L impact opportunities of using their short-term cash. Many hadn’t realised that this was an option. Our C2FO message of flexibility of balance sheet and P&L focus particularly resonated with the interests of the businesses in attendance.

On the supplier side, we had an interesting discussion with a leader in the oil and gas sector, who was looking to get more stability into their forecasting by looking at SCF as a way to predict receivables. The marketplace idea was interesting to them since they could control their rate and frequency of usage, which would benefit them from both a P&L and a balance sheet standpoint. Forecasting stability for large companies was somewhat of a theme, as it’s one of the most challenging parts of a treasury team’s job given the unpredictable nature of receivables.

Overall, businesses are still learning about the options for supplier financing. They are much more receptive to ideas and are looking to be educated rather than purely focusing on traditional finance options. There was a lot of debate about what the focus of supply chain finance should be for large companies, especially given the bad press with payment terms extension reaching 120 days. Many companies were looking to find more supplier-friendly ways to generate cash and de-risk their supply chain.

As Jason Bristow has said, “Corporate Treasurers don’t frequently have the ability to enhance both the P&L and the Balance Sheet – digital platforms do just that and are an extremely powerful tool for any Treasurer’s toolkit.”

As global businesses strive to use their working capital more efficiently, C2FO marketplace technology represents evolutionary advancements that will have the most benefit for both buyers and suppliers.