Supply Chain Financing

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Supply chain financing is a favorable option for many companies trying to simplify the payment process between a buyer and a supplier. It can significantly reduce supply chain bottlenecks and enable the optimization of working capital. However, companies often face paperwork buildup and potential miscommunication, which can be one of the more tedious downsides of supply chain financing.  

At SK Global Software, we have built a formidable solution to fix those types of problems in supply chain finance. Our Supply Chain Financing Module functions within Microsoft Dynamics 365 Finance and Operations to provide your organization an accessible platform for invoice processing and communication between vendors, suppliers, and SCF partners.  

Key Features  

  • Flexible payment options – set up directly with your supplier or your SCF partner 
  • Direct invoice uploading, which can be directly accessed by SCF partners 
  • Real-time notifications of invoice progress 
  • Intelligent highlighting of errors or unresolved issues  
  • Automatic reconciliation of supplier’s invoice once invoicing due date arrives 
  • Generation of invoice payables to SCF partners 
  • Equipped to handle any number of settlement options 

Convenient Approval and Payment Process 

In our Supply Chain Financing module, you have the option to either directly pay your supplier within a 60-day financing period or set them up with a SCF partner of your choosing in the system. Conveniently, you can upload invoices directly into the module, which can be viewed by your SCF partner. They then have the ability to directly approve within the module, allowing for an efficient approval process.  

Conveniently, our module automatically generates an invoice payable to your Supply Chain Financing partner once the invoicing due date arrives. This invoice will be handled through SK Global’s AP EFT payment process. Your SCF partner can then automatically reconcile your supplier’s original invoice directly within our module.  

The SCF partner and the vendor also have the flexibility to work within our module where they can resolve financing terms and handle their own invoice processing. The Supply Chain Financing module offers both stability and ease of mind to all parties involved, allowing them to work smarter together through our automatic uploading and approval process capabilities.  

Seamless Communication and Real-Time Notifications  

Real-time notifications will notify the necessary parties involved of the invoices’ progress, creating ease of communication across your network. SCF providers receive automatic notifications of new invoices while the buyer and vendor will be sent acknowledgements for when the SCF partner uploads an invoice. When errors or unresolved issues do occur, your team will be notified so that you can adeptly solve the issue.  

Expansive Settlement Library  

Our module handles a variety of settlements including due date-based settlements, file-based settlements derived from electronic invoices sent by the provider, and settlements without moving the payable on the due date. If your company uses an alternative form of settlement, work with our consultants who will provide top-notch expertise on how to integrate your form of settlement into our module.  

If you are interested in learning more about our Supply Chain Financing module, you can schedule a demonstration with us. SK Global’s Supply Chain Financing software is a key strength of our Treasury Automation Suite for Microsoft Dynamics 365 Finance and Operations. 

 

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How It Works: An Overview of SK Global’s Supply Chain Financing Module

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Supply chains span the entire globe, connecting suppliers and buyers across multinational networks. The sheer size of the supply chain and number of companies involved can make cash flow complex. Working capital can easily become trapped in the supply chain, limiting organizational operations and scaling.

Businesses can optimize their own cash flow, maintain simplified bookkeeping, and provide options for suppliers to do the same by partnering with a supply chain finance (SCF) partner. An SCF solution allows suppliers to get paid earlier without putting strain on buyers, and helps build stronger, more stable supply chain relationships.

What is Supply Chain Finance?

Supply chain finance, also referred to as supplier finance or reverse factoring, generally requires the buyer to have a higher credit rating than the supplier. The process is initiated by the buyer, not the supplier. The buyer places an order as usual and receives goods from the supplier, then is invoiced according to their agreement.

The invoice may be due on a 30- or 60-day net, meaning the supplier’s capital is tied up in the delivered goods. This can cause friction between the buyer and seller, especially if the buyer routinely runs out the clock on payments. Instability can cause delays on the supplier end if they cannot replenish their inventory in a timely manner.

Supply chain finance options allow a buyer to approve a supplier’s invoice, and confirm that the full amount will be paid when the invoice reaches maturity. The invoice is then presented to a third-party intermediary such as a bank or other financial institution for financing.

The supply chain finance partner pays the supplier early for their invoice and charges them a premium. When the original invoice matures, the buyer pays the intermediary the total amount originally due. This allows suppliers to maintain good cash flow, and buyers to maintain strong relationships with their suppliers.

The challenge to SCF adoption

The sticking point with supplier finance is the paperwork that must be conducted between the buyer and the SCF to manage all suppliers approved to receive a reverse factoring option. It can be one more series of steps to go through to get suppliers set up with a SCF partner, and manage both sets of invoices.

To reduce paperwork and multiple steps for successful SCF processing, SK Global’s Supply Chain Finance (SCF) module delivers complete and automated support throughout the supply chain finance process.

Streamlining SCF partnerships

The Supply Chain Financing module for Microsoft Dynamics 365 for Finance and Operations helps your company effortlessly:

  • Automate and streamline all communications with your chosen supply chain finance providers for hands-off operations
  • Manage all invoice settlements directly with your SCF providers rather than managing various payments to your original vendors
  • Support multiple types of settlement methods from one centralized dashboard to reduce errors or delays
  • Seamlessly integrate your new SCF module into your existing Microsoft Dynamics 365 Finance and Operations setup

Use case for the SKG’s SCF module

If your company makes a routine purchase from a supplier and receives a 60-day payment settlement window on the invoice, you have 60 days to complete payment, However, to maintain good relations with your supplier and support them to ensure they can restock before your next order, you may opt to connect them with your SCF provider.

Using the SKG supply chain finance module, your original invoice would immediately upload to your SCF partner, and you can opt to receive a notification stating whether the invoice was accepted for financing. From there, the SCF provider negotiates terms with your supplier independently, without further action required from you, and pays a discounted amount on the invoice through their own platform.

When the original due date arrives, the module automatically resolves the vendor’s original invoice and generates an invoice payable to your SCF provider, which is then paid by your accounts payable department.

Advantages of switching to SKG to handle SCF processes

SKG provides automatic notifications to the SCF provider when new invoices arrive from an approved vendor, and also manages receipt of notifications from the provider when the invoice uploads. Settlement notifications sent from providers are also monitored to prevent unhandled issues or missed rejected invoices.

For streamlined bookkeeping, the payable remains on the books with the original vendor during the original invoice term. On the due date, the original vendor’s is resolved and the invoice generated for the SCF provider. For multiple invoices due on the same date, aggregation by currency alone or vendor and currency is possible.

The Supply Chain Finance module can also work with SCF providers to handle various methods of settlement, including due date based settlements, file based settlements derived from electronic invoices sent by the provider, and settlements without moving the payable on the due date (if the SCF partner’s bank account has been associated with the original vendor.)

Are you ready for reverse factoring? Contact SK Global today to learn more about our Supply Chain Finance Module.