What is Dynamic Supplier Finance?

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Dynamic Supplier Finance (DSF) is a flexible funding option from C2FO that allows third parties to fund early payment from enterprises to their suppliers. 

With DSF, companies have the ability to seamlessly toggle early payment between their balance sheets and other funding sources, providing unparalleled control over how and when they fund invoices. 

By paying your suppliers early — with your own funds or through third-party funding — you can provide critical liquidity to your supply chain while still preserving your cash. DSF is a significant evolution in supplier finance that enables more of your suppliers to access early payment while also helping your company improve EBITDA and other financial metrics. 

How is DSF different from Supply Chain Finance?

Supply Chain Finance (SCF) is a way for very large enterprise customers to provide liquidity to their suppliers. Also known as reverse factoring, the customer typically initiates an SCF program with a bank.

Unlike the static discounts of traditional SCF, the C2FO platform allows suppliers to select the customer invoices they wish to accelerate and determine the discounts offered on each one. Early payment occurs from either the customer’s balance sheet or through C2FO’s funding network. The flexibility of DSF through C2FO’s early payment platform ensures that funding is always available, which leads to greater participation rates among suppliers than for most SCF solutions. 

Additionally, SCF programs require extensive paperwork, burdensome set-ups and are often only available to select, tier-one vendors. 

DSF differs from traditional bank financing by engaging suppliers of all sizes – from small and medium-sized business (SMBs) to large companies — with competitive pricing while placing no restrictions on spending. 

That means more of your suppliers (20X, on average) can access early payment through DSF than through static SCF models. This advancement eliminates the effort needed to segment suppliers, as this happens automatically when your suppliers name their rates through C2FO. 

For companies looking to make a quick impact and support their small and medium-sized suppliers, C2FO is a fast-start option that allows you to implement DSF in as little as four weeks with no IT work required. There are no contracts and no hidden terms or fees. 

C2FO provides a single, unified cloud-based platform with seamless collaboration among companies and their trading partners. A team of dedicated account professionals delivering outstanding service with leading technology ensures optimal working capital solutions and the best collaboration with trading partners.

Advantages of DSF

The Advantages of DSF 

Today, more than a million companies worldwide participate in early payment programs through C2FO, a marketplace designed to match large enterprises’ accounts payable with their suppliers’ receivables in a way that generates more working capital for everyone. 

Here are a few examples of how early payment through DSF can add value to your business: 

Control 

  • C2FO puts you in the driver’s seat. Toggle between self-funding and funding from partners as your working capital needs change. C2FO’s multi-bank finance model reduces risk and dependency. There are no more bank rules, mandates or funding disruptions. The supplier is never impacted by the nuances of who pays and the program evolves as you see fit. 

Flexibility 

  • With DSF, your suppliers have an always-on funding option. That flexibility drives greater usage and provides a valuable benefit to suppliers’ financial health. C2FO also works with you to source funding for as little as possible. Leverage alternative banking groups or funding partners within a day if needed, at competitive rates on the cost of borrowing. 

Scale your business 

  • C2FO has the infrastructure and network to grow along with your company. The return on cash through DSF can help improve EBITDA, core EPS and other key metrics. While working with the world’s largest companies, including 25 of the Fortune 100, C2FO’s mission is to deliver a future where every company in the world has the capital needed to grow.

Reduce your cash conversion cycle (CCC)

  • One of the most important metrics to reduce in order to create more cash on your balance sheet is Days Sales Outstanding (DSO). A high DSO, and one that continues to trend upward, indicates inefficiencies with collecting on receivables, which can lead to a cash flow crunch. The quicker your business can collect payments on invoices, the shorter your CCC becomes.  

Supply chain health

  • C2FO has the power of a worldwide network of buyers and suppliers to support financial health across all levels of your supply chain. Regardless of your suppliers’ size and location, the C2FO platform provides a single source of quick, efficient liquidity. 

How DSF helps your supply chain

Your supply chain is your most strategic asset. Ensuring always-on funding for your suppliers means greater support and stability across all levels. 

For example, a U.S. retailer with more than $130 billion in revenue and over 7,000 eligible suppliers wants to leverage its existing early payment program, with additional solutions from C2FO. A subset of the retailer’s suppliers are pushing for preferential rates on their accelerated invoices.

C2FO can address the large retailer’s needs with a combination of dynamic discounting (DD) and DSF. This enables flat or dynamic pricing for suppliers that’s funded from the company’s balance sheet or a funding partner, with the ability to turn funding on or off at any time. 

The flexibility of using its own balance sheet or a third-party funder enables the retailer to provide suppliers with working capital while also realizing EBITDA and margin improvements from the program.

The retail company can leverage alternative banking groups or funding partners within a day if needed, at competitive rates on the cost of borrowing. 

A funding solution for turbulent times

You want to protect your business and your supply chain, regardless of what’s happening in the market. 

The DSF offering from C2FO gives you the flexibility to support suppliers through early payment, while staying mindful of your own liquidity and keeping your business well-capitalized — an important factor to consider in today’s environment.

DSF provides greater protection from economic volatility by keeping viable cash on your balance sheet and investing in suppliers. It’s a more integrated and flexible funding option for companies that are eager to support their suppliers through the C2FO early payment system, but may not want to tap into their own cash reserves. 

Countless companies have faced financial pressure from the economic effects of COVID-19. 

For small and mid-sized businesses, cash flow has stagnated, illuminating the need for cohesive strategies that open up access to working capital.

It’s important to remember that keeping your suppliers’ liquidity flowing will help your own business thrive. Capital is crucial for businesses of all sizes to emerge successfully when the economic storm has passed. 

Bottom Line

With DSF, C2FO becomes the most flexible early payment program for you and your suppliers. Unlike other programs like SCF, you are always in complete control in managing working capital. 

From managing KPIs by funding only intra-quarter payables to utilizing the program to address shareholder interests, the always-on technology of DSF combines the power of your liquidity with funding from banks to help you pay on your terms while strengthening your supply chain.