In a global supply chain, each supplier, regardless of size, can form a critical link. But as trade tensions escalate and macroeconomic conditions worsen, global supply chains – and the suppliers that underly them – are looking increasingly vulnerable. If a link in the supply chain breaks, production lines can grind to a halt – a particular worry for the large buyers that sit atop this global process.
To foster stability across supply chains, and to help suppliers optimise their working capital, companies are increasingly turning to payables finance, a supply chain finance technique. Through payables finance, large corporate buyers can extend or maintain existing supply payment terms and suppliers can access financing at a rate that reflects the risk of its highly creditworthy buyer.
But as demand for payables finance grows, how is the industry adapting to meet it? Christian Hausherr, Chair, Global Supply Chain Finance Forum and Head of Product Management, Trade Finance and Supply Chain Finance, Deutsche Bank, explores in an article for TXF.
The article can be read here (behind paywall)
Demand for payables finance programmes has continued to grow in recent years, fuelled not only by working capital concerns, but also by the need for greater stability, as supply chains navigate an increasingly volatile economic environment. As an expanded base of anchor buyers, including non-investment-grade companies, move into the market for payables finance, however, the creation and implementation of robust industry standards will be important to ensuring the solution develops sustainably. In an article for TRF News, Deutsche Bank’s Christian Hausherr explores how payables finance is adapting to meet these ever-evolving demands.
To read the full article, please click here
In an increasingly competitive supply chain finance ecosystem – consisting of banks, non-banks, and a combination of the two – what makes a payables finance programme ‘successful’? And how can corporate treasurers select an effective provider?
Writing in TMI, Anil Walia, Deutsche Bank’s Head of Financial Supply Chain, EMEA, suggests that corporates should base their search for an effective provider on three simple criteria: Is the payables finance programme easy to set up (and how is technology facilitating this)? Can the provider successfully on-board suppliers across all relevant geographies (and how is technology being used to make this more efficient)? And perhaps most importantly, is the offering structurally sound and sustainable?
Even as emerging new technologies, such as blockchain and artificial intelligence, continue to broaden the current and future options available to corporate treasurers, Walia argues the “fundamental questions a corporate must ask of their provider remain the same”.
To read the full article, please click here.
When faced with the choice of cash to fund a corporate finance strategy or cash to meet a 30-day supplier schedule, the revenue-generating activity will obviously be more alluring. However, while extending payment terms makes it possible to grow cash mountains, what happens if the supplier goes out of business while they wait?
Enter payables finance – a buyer-led supply chain finance technique through which sellers in a buyer’s supply chain can receive the discounted value of its receivables (represented by outstanding invoices) before the due date, and typically at a more attractive rate than it could normally obtain (the financing cost is aligned with the higher credit rating of the buyer).
Two decades since the birth of the payables finance business, the market has grown rapidly – both in terms of size and scope. At Deutsche Bank, payables finance has become the fastest growing business line within the trade finance product family. Moreover, while, dominance still resides largely with five or six global banks, a new generation of non-bank platform providers have also significantly increased their share of the market – advertising enhanced digital interfaces, simplified implementation processes, and new business models (such as those focusing on smaller suppliers, offering auction based solutions, and those incorporating dynamic discounting).
Deutsche Bank’s new publication, “Payables Finance: A guide to working capital optimisation”, which brings together experts from across the supply chain landscape, sets out to explain the progress of this remarkable business to its current position as a core supply chain management and working capital tool – and to address its potential going forward.
Significantly, the publication defines exactly what makes a successful payables finance programme in an increasingly complex ecosystem of buyers, providers, and financiers and explains how payables finance is helping to bridge the US$1.5trn shortfall in global trade finance (as reported by the Asian Development Bank).
To read more, please click here
The ‘success’ of a buyer-led supply chain finance (SCF) programme is often measured by the efficiency and speed of the on-boarding process. A well-executed programme will: clearly communicate the working capital benefits to the suppliers; enrol them quickly and in number; and put little burden on suppliers to ensure the outcome is positive for all.
However, writing in BCR’s World Supply Chain Finance Report 2018, Deutsche Bank’s Head of Financial Supply Chain, EMEA, argues the efficacy of supplier on-boarding should not be the only barometer of success.
“In today’s ever-more complex SCF market, a more holistic, long-term approach to measuring success is also required”, states Walia. “Both SCF providers, and corporate buyers, need to ensure they balance efficiency and nimbleness with programme safety, soundness and sustainability”.
To read more, please click here, p.24-26.