IFG InSights, News and Media
Throughout this decade with the growth of buyer-led supply chain finance programs or buyer-sponsored early payment services, teamed with the increase in attention to SCF services in general, we have witnessed significant technological transformations within the industry.
A recent Harvard Business Review article paints a dire picture for small and mid-sized suppliers (SMEs), and for the larger companies that depend on them. “A Financial Crisis is Looming for Smaller Suppliers” argues that the global pandemic is only the latest challenge to challenge the liquidity of small companies.
Access to working capital has never been more critical for corporate buyers and their suppliers. Here’s what IFG is doing to help.
With the growth of financial technology, Accounts Payable has become an area of opportunity for corporate buyers. V-Card offers a new opportunity for savings through rebates, but its acceptance among suppliers is capped by high fees. Savvy buyers are adding early payment solutions to their Accounts Payable mix - providing both a savings opportunity and a benefit for their critical suppliers. These solutions can work together as part of a smart mix of benefits for buyers and suppliers alike.
Any entity that funds the early payment of invoices takes on risk - even when the invoices are approved and scheduled for payment. If you’re considering Supply Chain finance, it’s vital to understand how your funding partner will choose to manage risk - and the downstream implications of that risk management for your business.
LIBOR has been the default benchmark interest rate for supply chain finance since this technique was developed approximately 20 years ago. By year-end 2021, LIBOR will be phased out.
These are some strange times. Look, we have $16 trillion of negative yielding bonds, that’s T, for trillion. I’m asked by non-financial people why anyone would want to buy negative yields (you pay to hold them, btw) and I reply, it’s not about income, it’s about trading that rates will fall further.
The popular opinion has been that many large American companies are flush with cash. In fact, surveys from some reputable institutions support this view. The AFP’s corporate cash survey found during the second quarter of 2019, U.S. businesses continued to build their cash and short-term investment holdings. This is intuitively supported by events like the corporate tax cut last year.
The phrase ‘it's better to be lucky than good’ must be one of the most ridiculous homilies ever uttered. In nearly any competitive endeavor, you have to be damned good before luck can be of any use to you at all.”
What is the most resilient parasite? Bacteria? A virus? An intestinal worm? An idea. Resilient … highly contagious. Once an idea has taken hold of the brain it’s almost impossible to eradicate.
There was some recent shaming of some very large companies by the UK government that did not comply with the Prompt Payment Code (PPC). Seventeen large companies, including heavyweights such as Vodafone, Rolls Royce, SSE and British Sugar, were suspended pending promises to fall into line.
When we look at source-to-pay solutions, we tend to look at it from one side, that is, how this is going to improve the accounts payable department, reduce cost, be more efficient and improve supplier collaboration.
Funding has grown more sophisticated with supply chain finance programs to large companies, driving margins down in many cases. There are several interesting issues around pricing:
As we pointed out in our last post, payment companies are looking to convert paper checks to cards, and this is drawing interest from many firms, from private equity investing into payment companies to acquisitions (e.g., Fleetcor acquiring Nvoicepay, Visa buying Earthport).
We hear so much about how flush American companies are with cash. Pundits are out there talking about how much cash corporate America has.
“When an inflation regime shifts, there’s only one question that really matters for your business model: Do you have pricing power?”
Few source-to-pay platforms, payment processors or other networks have been able to develop early pay dynamic discounting management (DDM) or supply chain finance solutions that have added significant revenue to their enterprises. (See Why Platforms Need to Monetize Their Supplier Ecosystem.)
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