Supply chain finance, also referred to as reverse factoring or approved payables finance, is a set of solutions that improves cash flow by allowing businesses to optimize supplier payment terms. Simultaneously, it provides the option for suppliers to receive early payment as soon as invoices are approved in return for a nominal finance charge. This frees up cash that would otherwise be trapped in the supply chain, enabling both buyers and suppliers to survive economic volatility, invest in growth and outperform competitors.

In addition to receiving early payment, suppliers have more visibility into invoice approval and payments. That means fewer surprises and errors in the payment cycle and improved cash flow forecasting.

All of this occurs without negatively impacting the company’s or its suppliers’ balance sheets.

PrimeRevenue provides a cloud-enabled platform that creates a digital ecosystem between buyers, suppliers and funders. It facilitates the exchange of information about receivables and the flow of funding.

Here is a snapshot of how the process and platform operate:

1. Supplier sends their invoice to the buyer following normal protocol.
2. Buyer approves the supplier’s invoice and invoices are uploaded to the PrimeRevenue cloud-enabled platform via ERP integration.
3. Supplier has full visibility of approved invoices and is notified when invoices are eligible for early payment.
4. Supplier chooses whether and when to trade an invoice for early payment. This can be immediately after the invoice has been approved or any day leading up to maturity. Alternatively, the supplier can simply wait until the invoice has matured to receive payment.
5. When an invoice is traded for early payment, the funder receives and processes the early payment request, then pays the supplier based on the agreed-upon discount rate. The funds are transmitted directly to the supplier’s bank account on the next business day.
6. At invoice maturity, PrimeRevenue uses the buyer’s bank account to pay the funder.
7. If the supplier has chosen not to trade the invoice, PrimeRevenue will facilitate payment from the buyer’s bank account to the supplier on the due date.

When executed properly, supply chain finance does not count as additional debt for the buyer or supplier. PrimeRevenue’s programs have been scrutinized by global accounting firms. For buyers, trade payables stay as they are – trade payables. For suppliers, there is no effect on outstanding debt covenants or balance sheets.

Both buyers and suppliers benefit from supply chain finance. PrimeRevenue’s customers improve working capital by an average of more than $200M. Buyers and suppliers can use this cash flow improvement to drive growth, reduce debt and diversify liquidity alternatives. Suppliers participating in buyer programs are able to improve cash flow and gain greater visibility into invoice approvals and payments. Supply chain finance is effective in any business climate.

When properly communicated, most suppliers understand the importance of supporting a buyer’s drive to optimize its working capital position. Suppliers also value how supply chain finance offers visibility and the opportunity to improve their own working capital position by taking advantage of early payments offered at a favorable rate.

As such, PrimeRevenue has seen a 70 percent supplier participation success rate in our programs during the last three years.

PrimeRevenue is a cloud-enable platform that integrates easily with most major ERP systems. There is very little impact on your IT infrastructure or team.

Single-funder supply chain finance programs are risky. This is because funding in these programs is typically uncommitted. Due to economic conditions and/or regulatory pressures, banks’ strategies can change suddenly and prompt them to reduce their financing of supply chain programs, increase pricing, exit a specific market or even stop funding programs altogether.

PrimeRevenue’s multi-funder structure mitigates these risks. Our global network of 100+ funders ensures your supply chain finance program is always funded. PrimeRevenue also has an extensive track record supporting long-term supply chain finance programs that extend deep into the supply chain. Banks typically only penetrate the top 30 percent of the supply chain, while PrimeRevenue targets 100 percent.

As a result, PrimeRevenue-led supply chain finance programs deliver bigger cash flow improvements while extending the benefits of supply chain finance to a larger number of suppliers.

There are multiple benefits. A multi-funder structure secures more attractive rates due to its competitive nature, resulting in consistently lower pricing than that of other supply chain finance providers. PrimeRevenue maintains relationships with funding sources across multiple geographies, enabling buyers to support suppliers across the globe. Multi-funder structures also mitigate the risks of a single funder reducing its commitments to a program, as described above.

On average, it takes 30-60 days for companies to implement a program. However, this varies depending on the alignment and resources of the buyer implementing the program. PrimeRevenue provides buyers with a detailed implementation plan that clearly outlines tasks, timeframes, team members, milestones and critical success factors.

It is critical that your procurement team has incentives that align to the goals of the program. The treasury, finance and procurement teams should set agreed-upon objectives prior to execution. Part of this alignment involves assuring the procurement team is properly trained and equipped to be successful. PrimeRevenue has an extensive training and support program and provides tools to assure success for both organizations.

PrimeRevenue provides ongoing customer service and support for your program.

Implementing a supply chain finance solution doesn’t have to be daunting. A competent partner like PrimeRevenue can streamline and simplify the process, identify and communicate working capital improvement potential to internal stakeholders, and help you clearly articulate the mutual benefit with suppliers.

In addition, we provide:

• Data driven analysis of your entire supply chain to determine optimal payment terms and prioritization of suppliers.
• Collaborative training of procurement teams to develop a joint go-to market strategy complete with customized supplier messaging.
• Co-presentation support for large and mid-sized suppliers.
• Cloud-enabled on-boarding process for buyers, suppliers and funders.
• Global support across geographies and time zones that extends to funding capabilities.
• The ability to sustain a program beyond just the largest suppliers to standardize terms and cash flow gains across the entire supply chain.

Supplier finance works for companies in a variety of sectors, including automotive, electronics, manufacturing, retail, and many others. It works for companies on both sides of the supply chain. Buying organizations can extend their payment terms, and suppliers can get paid earlier. Supply chain finance is a true win-win solution for both trading partners. The PrimeRevenue team works closely with buyers and suppliers to craft a supply chain finance plan that fits the evolving needs of both parties. Contact us today to find out how we can serve your needs.

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