There are several factors driving invoice financing strategies. These factors may include improved technology, availability of newer forms of funding, more complex global supply chains, and the challenge of obtaining commercial financing from traditional sources, largely due to the 2007–2009 economic downturn. These factors have provided both the incentive and the opportunity for improved supplier payment mechanisms. These days, customers want to hold on to their cash longer, leading some to extend payment terms to 60, 90, or 120 days.
The upcoming Receivable Savvy 2017 Perceptions Study indicates that only 19% of respondents are very familiar with different forms of early invoice payment options available to their organization. With that in mind, we’ve published The Definitive Guide – Early Invoice Payment: The supplier’s guide to understanding early invoice payment options and how to leverage it for improved cash flow. This free eBook outlines, in detail, various early invoice payment options available to supplier organizations, different solutions providers that facilitate early payment and the most common questions supplier organizations ask regarding early invoice payment.
Following are two questions taken directly from the eBook as well as an overview of a solution provider highlighted in the document covering exactly what they offer to supplier organizations.
Does it matter what the funding mechanism is for suppliers when it comes to Dynamic Discounting or Supply Chain Financing? Not particularly. The supplier is still paid early and with the involvement of their customer in some capacity. For Dynamic Discounting, the funding is usually done by the customer, while Supply Chain Financing is typically funded by a third-party entity such as a bank or another provider. The discount rate could be identical, the money remains the same, and there is no issue of whether the customer will satisfy an outstanding invoice from the supplier’s perspective once early payment is made.
Is there one method of accepting early payment that is better than others for suppliers? Because the answer is very subjective, it depends on the individual goals of each supplier. If the supplier wishes to take early payment but not involve the customer at all, they may choose to use a factor or some form of third-party Supply Chain Finance solution where the customer is not involved. If the supplier is not opposed to involving the customer, they may choose the customer’s Supply Chain Finance or Dynamic Discounting solution. The supplier might also choose to add a prompt payment option as part of their payment terms and simply leave it up to the customer.
An example of an early payment solution provider – C2FO
C2FO improves the bottom line and strengthens supply chain health for companies around the world with their unique marketplace approach. The C2FO marketplace uses its proprietary technology to facilitate real-time collaboration between buyers and their suppliers to discover the optimal rate for working capital.
Suppliers, often companies working to improve their pricing and access to liquidity from traditional sources or companies looking to enhance DSO and other operating metrics, can accelerate payments from their buyers if, and when, they want, in just two clicks, at a rate that works for them.
C2FO makes it easy for companies to benefit from their working capital marketplace because once the program is live, the C2FO team does all the work.
Only C2FO allows buyers and suppliers to collaborate in a real-time marketplace to provide and access working capital at the best price. If one thinks of “early payment” as the solution, it limits the possibilities for the value that a marketplace provides. Early payment implies that companies are only trying to be paid sooner or are trying to avoid late payments. On the contrary, with a marketplace approach, businesses with different cash flow positions and working capital needs can use an “early payment” vehicle to achieve very specific working capital goals.
For suppliers, the ideal application is that they have ultimate cash flow optionality and control with C2FO to improve financial metrics or results for their businesses. There are many reasons for using C2FO including inventory investment, paying suppliers in advance, managing seasonal peaks in business cycles, buying equipment, expanding product lines, paying quarterly taxes, lowering cost of borrowing, and even eliminating the need for factoring.
Download the free eBook for a comprehensive overview of early invoice payment
Get a comprehensive overview on early payment and the answers to suppliers’ most frequently asked questions by downloading the free eBook: The Definitive Guide – Early Invoice Payment: The supplier’s guide to understanding early invoice payment options and how to leverage it for improved cash flow.
You can download the free eBook here.