In today’s fast-paced and rapidly-changing world, it has become more important than ever for businesses to be agile and adapt to shifting market conditions and dynamics.
Supply chain financing is a case in point. Greater flexibility in payment terms and solutions has become increasingly important for buyers navigating challenges from widespread global disruption in recent years.
Yet, this is often easier said than done. Resilient financing solutions with a global reach typically involve a complex financing structure, multiple local IT providers as well as accounting and, most importantly, procurement teams involved. This takes time to set up and can make it difficult for both banks and non-bank payment providers to offer immediate results and flexibility in the financing solution.
Orbian’s response has been to pioneer Payment with Terms, a solution focused on improving balance sheets without involving procurement or suppliers.
In short, Payment with Terms enables providers to pay suppliers on the due date and offers buyers a payment term to pay for the Orbian service. This protects the buyer’s liquidity while improving working capital – and without involving the supplier.
Making payments more predictable
A key differentiator for such a solution is giving global businesses the predictability they want in their cash flow planning.
Historically, the cash flow impact of a supply chain finance program was forecast by estimating how the procurement team negotiates payment terms with certain suppliers to achieve specific objectives in terms of working capital. However, this often leads to incorrect forecasting as changing market conditions, supplier dynamics, customer demand or simply missing resources in procurement can make it difficult for buyers to predict outcomes.
Payment with Terms as a solution takes the supplier and procurement process out of the equation and instead puts the buyer’s treasury team in control.
If the treasury team is in control of the volume that runs through the Payment with Terms solutions, rather than seeking approval from a supplier or calling on the procurement team to renegotiate payment terms, then a buyer can benefit from greater predictability in working capital.
Digitalisation can also play a key role in creating more predictability in financing. Orbian achieves this by partnering with a data analytics platform to use artificial intelligence (AI) to predict the outcome of a supplier/buyer negotiation before it happens.
Based on data for payment terms a certain supplier or a peer supplier has accepted in the market when dealing with different buyers, AI can recommend to a buyer the best ways to approach that same supplier. As a result, the outcome becomes much more predictable.
Creating a synergistic solution
Two longer term benefits materialise when payment solutions are more flexible and predictable.
Firstly, a particular supply chain finance programme that is more flexible is better equipped to master challenges. It should hence grow bigger and last longer. Secondly, perhaps more importantly, there will be less resistance to creating a new programme.
Setting up new programmes is typically difficult given the need for multiple stakeholders, and procurement, treasury and IT teams all need to agree. There is a significant undeniable benefit from a solution that allows a treasurer to meet working capital requirements while giving the procurement team more time and specific guidance to negotiate with suppliers.
