This report takes a deeper look at why suppliers value a “working capital game changer” to improve their cash flow through the early payment of approved invoices.
It includes the results of The C2FO Working Capital Outlook Survey, which examined more than 1,000 U.S. business owners’ preferences for improving working capital efficiency, including trends associated with financing, working capital deployment and late payments.
Working capital access, control and efficiency are challenges for the global supply chain
Many SMBs are nding that their access to working capital has not returned to pre-recession levels and some analysts predict that a complete recovery may never occur due to changes within the banking industry. Even if an SMB can secure ongoing working capital funding, it often involves risk-based underwriting and constant bank covenant compliance monitoring.
Plus, as more buying organizations implement term extension strategies to improve their working capital positions, this practice is often crippling for smaller suppliers unless they are provided an affordable and exible option.
In today’s economic climate, there are more varied options for obtaining working capital than ever before, but they may not be equally accessible, affordable or desirable.
- Traditional funding options are less efficient for buyers and suppliers
- Legacy dynamic discounting offers “one-size- fits-all” pricing for suppliers and produces lower supplier adoption rates and less income for buyers.
- Static discounting requires a supplier to constantly discount invoices at higher rates. Plus, most buyer companies find it difficult to capture 100% of discount income and suppliers generally price those discounts back into cost of goods.
- Supply Chain Finance (SCF) is typically effective for larger suppliers, requires risk-based underwriting and complicated paperwork and contracts. Buyers can increase their DPO (Days Payable Outstanding), but they don’t recognize additional income.
- Factoring provides consistent working capital to suppliers but agreements have volume restrictions and higher rates.