A/P Series Part 4: The Why

by | Feb 19, 2019 | A/P Series, Accounts Payable, Supply Chain Finance

Welcome back! This is part four of a six-part series focused on how you, as a bank or lender, can offer Supply Chain Financing to your clients.  The series showcases the strategic benefits your clients will realize via this program. My past two posts centered on the benefits of not paying with checks, and then more broadly, taking advantage of the wide array of payment types Supply Chain Finance offers your clients’ suppliers. This post is going to focus on the two core components of Supply Chain Financing – extending payment terms for your client and providing suppliers with an early payment option.

The fundamental question to ask is, “Why do most suppliers offer a discount in exchange for early payment?” The obvious answer is: they need cash now to pay for their short-term working capital needs – payroll and supplies. But suppliers’ customers don’t want to pay as fast as possible, for the same reason suppliers want their money – the suppliers’ customers need cash now to pay for the same short-term working capital needs. Therefore, basic economics concludes that suppliers must incentivize early payment if they want their buyers to pay early. However, even with incentives, many companies are either unwilling to pay early or are unable to do so. This results in trillions of dollars locked in A/R and A/P, working capital, the supply chain – whatever you want to call it.

How do we unlock and access these trillions of dollars?…While making both buyers and suppliers happy – simple, add a bank or lender and Supply Chain Finance to the equation.

  • You, the bank/lender, offer the Supply Chain Financing program, providing clients the opportunity and ability to hold onto their cash while simplifying their cash management and payment processing – win.
  • Plus: Your clients put their suppliers in control of their accounts receivable, giving them the option to select early payment on any approved invoice (the very thing they have been incentivizing and asking for!) – win.
  • Plus: When suppliers request early payment, you pay on your client’s behalf and realize the early payment discount (which you can share or not with your client) – win.
  • Equals: Supply chain finance for the hattrick, win-win-win.

Supply Chain Finance has been used for decades by Fortune 500 companies. Unfortunately, size, technology, cost and complexity blocked the solution to the small and middle market. Now, there is ArtisPay. ArtisPay allows banks and lenders of all sizes to unlock the capital in the small and middle market.

For more information, contact the Artis Trade team via email at admin@artistrade.net.