How Does Advanced Supply Chain Finance Benefit your Business?
Supply chain management (SCM) is the process to streamline and reduce costs of procurement of raw materials and delivery of the final product to customers.
Clearing bills payable while taking care of bills receivable is also part of SCM to effectively run the entire process.
To do that, businesses take help of supply chain finance (SCF), which helps them manage their working capital. It keeps track of all purchases of raw material and revenues collected from sales.
Well-maintained SCF will help in having the required balance and collaboration between a buyer and seller and thus making profits for your company.
To learn more, take a look at how SCF works:
- After a sale has been made, a supplier sends the invoice or bill to his buyer or customer.
- Buyers after approving the invoice can upload it on the official SCF portal which is also known as a supplier platform. They can access this platform to check all invoices as per requirement.
- Once the approval is made, a supplier can visit the platform to transfer the invoice amount to his account on the maturity date.
- The portal also allows a supplier to take the invoice amount in advance as a business loan for supplier from financial institutions through this platform. However, such transactions can only be made after a buyer promises to pay the amount on the maturity date. The risk of such advances lies with a buyer and not a seller.
- On the maturity date, a buyer pays the total amount to the respective financial institution on the portal or seller.
How does supply chain finance benefit?
- Helps to incorporate appropriate inventory management techniques to save money.
- With the supplier platform, sellers can generate their payment earlier than the maturity date as and when required and increase their source of liquidity.
- Buyers get an extension of their payment due date.
- Brings transparency to the whole payment process.
- Provides a centralised portal for supply chain finance which both supplier and buyer can access to collect information.
- Reduces the number of pending bills.
- Builds a strong relationship between a customer and a seller.
- Assists you in optimising your working capital better.
Along with the above benefits, management and finance in the network of supply chain helps you improve the quality of your products and customer satisfaction. Well-executed supply chain management also increases customer preference.
You can make your SCM more efficient by experimenting with new ideas and analysing which plan suits your business. Also, work in coordination with the employees, investors and shareholders.
Clear up the old stocks before you invest in new stocks. Segregate your stocks using the ABC analysis. In such analysis ‘A’ stands for high-valued products, ‘B’ stands for moderate-value products, while ‘C’ stands for low-value products.
Analyse your suppliers based on the quality of products and type of suppliers. Do make sure to have a crisis management policy. To ensure the smooth running of your business consider clearing any credit amount to eliminate the accumulation of debt and to lower the burden on your pocket.