4 Things to Know About Dynamic Customer Finance

Accelerate or extend payment of your accounts receivable, when it works best for you and your customers.

As you know, when operating a business, the only constant is change. Right now, your company may be flush with cash. Fast-forward a few months, however, and you may be exploring additional funding options. In business and finance, nothing remains the same. So why settle for other antiquated financing programs with rates and covenants that are static?

At C2FO, much of our focus over the past 10 years has been on helping corporate supply chains generate the cash flow they need through early payment on their receivables. But your vendors aren’t the only ones who stand to benefit from greater control over working capital.

Dynamic Customer Finance (DCF) from C2FO provides tools for enterprises to accelerate or extend payment of their own accounts receivable, allowing for more flexibility and a quicker response to changing market conditions. It enables you to manage your receivables on a continuum, activating early invoice payment when you need to build more cash flow or accepting later payment from customers (in exchange for a premium) at times when cash flow is already strong.

“Working capital is inherently dynamic and constantly subject to a variety of internal and external factors,” said Suneel Chirunomula, managing director for C2FO. “C2FO technology now provides a central platform to help corporates manage these often conflicting factors on both sides of the balance sheet.”

How can Dynamic Customer Finance help your organization? Here are four key benefits:

1. You gain flexibility and control over receivables

Your company’s cash position may change depending on the time of year, economic factors and seasonal sales gaps. DCF addresses these fluctuations.

At times when your company needs more cash flow, you can use the C2FO platform to accelerate payment on invoices of your choice, at pricing that is agreeable to you and your customers.

If your company has ample cash, you may find it beneficial to delay outstanding payments from your customers. With DCF, you can extend payment on your receivables, in exchange for an agreed-upon premium. In other words, you’ll be paid more to be paid a little later, while helping your customers enhance their own cash positions.

No other technology platform exists that enables extended payment from your customer without an awkward negotiation about a premium, Chirunomula said.

“If it’s a delayed payment request, there’s always more that goes into the dialogue than just the invoice payment,” he said. “What we’re doing is distancing the corporation and the customer from that conversation, and instead providing a tech platform, at the invoice level, where you’re giving trading partners the flexibility to establish the real-time value of that payment timing.”

Toggling between acceleration and extension of your receivables is seamless and simple, with just a few clicks on your dashboard. This on-demand flexibility gives you greater control over working capital and allows you to respond quickly to changes that affect your business.

2. You can use it with any customer

C2FO provides corporates with access to early or delayed payment requests regardless of the customer. This can be accomplished through either your own balance sheet or that of a C2FO funding partner.

This multi-channel network of third-party capital provides the flexibility for you to choose whose balance sheet to leverage, enabling your company to achieve key metrics without interfering with any of your customer relationships. It’s also an opportunity to continue working with customers that may be slow to pay your receivables due to temporary cash constraints.

3. You can fund it yourself or through a third party

C2FO’s Dynamic Supplier Finance (DSF) solution provides corporates with three options: fund the program through their balance sheet, through an outside funding source in C2FO’s global network, or use a blend of both.

Dynamic Customer Finance works the same way for your accounts receivable that DSF works for your payables. If you wish to extend payment from a customer, you can draw from your own cash, a third party, or a mix of the two.

This mechanism is especially useful in times of economic hardship. Recently, a $20 billion global IT and consulting company needed to eliminate risk on multi-million dollar receivables from a cash-strapped, major US retailer. C2FO was able to curate a solution through DCF, enlisting a funder from its network to purchase the unpaid receivables, freeing up cash flow for the corporate, reducing risk and allowing it to continue doing business with the US retailer.

4. It works seamlessly with C2FO’s other solutions

C2FO provides a single technology platform with many dynamic solutions to help companies of all sizes meet their working capital needs.

As an organization, you can use C2FO to manage your AP and AR in the same flexible, on-demand way. You can utilize DSF to accelerate or extend payment to suppliers, using your own balance sheet or a third-party funder. Likewise, you can use DCF to easily manage your receivables with any of your customers. There’s no need for multiple financial portals or funding programs.

Borealis AG, a chemicals company based in Austria, uses C2FO as a way to pay suppliers early, at rates that meet their needs. But Borealis also uses DCF as a dynamic way to control its own cash and receivables.

“With C2FO, we provide our suppliers a platform to accelerate invoices: they reduce their cost of finance and we improve our margin and cash yield,” said Jan-Martin Nufer, Borealis VP of treasury and funding. “At the same time, we have also developed an innovative offer for selected customers: the opportunity for dynamic invoice extension.”

The bottom line on dynamic customer finance

Your trading partners need cash flow, especially in challenging economic times when banks and government programs don’t provide enough liquidity. However, large enterprises are not immune from market fluctuations, and need to manage and protect their own cash positions.

DCF is an effective, flexible way for companies to manage their receivables in any economic environment, whether they need to be paid early to build cash flow, or have the luxury of agreeing to be paid later in exchange for a premium. Third-party funding can be utilized when needed to mitigate risk and maintain customer relationships.

“We’re offering flexibility,” Chirunomula said. “There are times when you might say, ‘I have no intention of using my own cash at all because I want to preserve it.’ But a year from now, you may be facing a substantial cash surplus and you’ll have a different approach.”

In addition to other C2FO products like Dynamic Supplier Finance, DCF aids the management of working capital for everyone, regardless of where they are on a supply chain. And it’s all done from a single, easy-to-access digital platform.