Alex Mutter, Head of Sales EMEA
For many years, supplier finance has been seen as a function only available to the largest companies in supply chains and those with close relationships to the banks that provide the service. In recent years, fintechs have enabled a variety of companies to get access to affordable financing through technology-driven early payment solutions. It is now easier for companies of all shapes and sizes to scale their supply chain operations by capitalizing on early payments offerings.
Why would you need supplier finance?
2020 was a disruptive and challenging year for many businesses, however, it shed light on the strength and flexibility of supply chains across the globe. Be it a fall in demand, liquidity squeezes or weaknesses being highlighted in global supply chains, many businesses are now reviewing the robustness of their supply chains. There has been much debate about the best business models to enact supplier finance to be shockproof, but realistically it is about the ability to offer flexibility and more control. Previously, supply chain management was considered an operational function for businesses, but it is increasingly being viewed as a strategic imperative. That has only been accelerated by the past year’s events. Early payment solutions are now seen not just as a tool of financing or capital management, but as an important requirement to prepare for an uncertain future. Early payment platforms can provide a mechanism to financially equip a supply chain to better manage unpredictable shocks and lapses in the future.
Planning – Where do you want to go?
We have found that there is a key framework when implementing and scaling early payments, in order to provide liquidity and strengthen a supply chain. This includes a number of easy steps for CFOs, treasury and procurement teams to follow when looking to scale early payments.
Firstly, there are two key questions that your planning needs to answer: what are you trying to achieve? How will you measure success? By answering these two questions, you are making sure you have clearly stated objectives in building your roadmap.
Every project is unique, but in our experience there are some clear underlying themes to consider when setting objectives. We use the acronym SMART – Specific, Measurable, Achievable, Realistic and Timely – to ensure that program objectives are clear and businesses know what to expect at the end of the process.
With clear objectives in place, it is then important to ensure that modelling is undertaken to simulate a practical decision-making path and ultimately ensure your objectives are aligned towards successful outcomes.
Tools & resources – Who will lead you there?
Once goals are fixed, it is important to find the best tools and resources, both internally and externally, to achieve these goals in the most effective and efficient way.
Internally, the most important factor when building a successful team to manage supplier finance is ensuring that the business is represented in the team. This normally means ensuring the team unifies the procurement, finance, treasury, accounting and IT departments.
This team will be responsible for: setting and communicating clear, measurable objectives; establishing timelines; committing resources; selecting providers; implementing the solution; executing the strategy and remaining accountable for ongoing success as measured against the objectives. They will also need to manage any external tools, resources and service providers.
The choice of external tools and resources is often seen as a complicated process, with many companies wary of the integration of new or difficult technology. At Taulia, we pride ourselves on the ease of implementation of our technology solution. For example our 90 second registration system ensures that the process is not onerous. One of the success factors here is scalability.
Strategic preparation
The best programs are led by people or teams that have an accurate picture of their physical and financial supply chain, which includes an understanding about supplier relationships. This in-depth knowledge of suppliers is an extremely important component when analysing and managing a supply chain, along with strategic importance, geography/region, IT landscape, supplier size, contractual restrictions, ESG programs and regulatory restrictions. The best programs also build strategic planning around business processes and implement communications plans to ensure the entire supply chain is working towards the same goals.
The past year has been one in which strategy and implementation of planning has been stretched, and the vast majority of companies have had to pivot to ensure that goals are still met. During times like these, it has become apparent just how important it is that supply chains work together strategically and communicate openly to reach joint goals. This has also been very apparent in the provision of early payments, with liquidity being key to providing resilience to companies within a supply chain.
Operational readiness
The next step is key to ensuring your organisation is fully aligned on the objectives, strategy and framework you have built. It is important that everyone has clear ownership and understanding of their roles and responsibilities. Don’t forget to establish who is taking ownership of reporting the progress either.
Internally managing and educating staff, especially supplier-facing staff, on the implementation of your early payment program is key to ensuring that the process is smoothly implemented.
Execution and growth
No business should be implementing a process such as early payment programs without building in an expectation of learning as plans are put into action. Tweaks, adjustments and strategy realignment are all expected to be necessary to ensure goals and objectives are being met. As such, trusted relationships should be a key focus to ensure that you manage any bumps in the process most effective.
Once the dust has settled on the implementation process, it is also important to develop a growth mindset around the program. Significant traction and progress has been made but it is important that your team and the tools being used are refocusing the program to continue to deliver success beyond implementation.
Supplier finance, like any multi-functional strategic initiative, requires strong analysis, robust planning, clear objectives and cohesive partnership in order to leverage state of the art technology successfully.
