Supply Chain Financing (SCF) enables companies to provide early payment solutions to sellers via a third-party funded solution by partnering with financial institutions like Tata Capital. Through supply chain financing, sellers can receive early payments at low-interest rates without much paperwork and collateral. On the other hand, buyers can optimise their working capital by extending the credit period without affecting their seller’s financial position. Although supply chain financing offers businesses a visibly apparent win-win situation, its potential remains largely untapped. 

Here are some ways to leverage supply chain financing and yield maximum returns

1. Have a clear strategy

Supply chains and payment terms vary from one trade relationship to another. So do the needs of diverse sellers and buyers. Before embarking on a supply chain financing program, it is essential to establish the desired outcomes. Is it to improve the company’s working capital position? Or to strengthen channel partners and earn goodwill? 

Clarity behind such a partnership can help financial institutions devise the most appropriate structure for the program. At Tata Capital, we customise our invoice discounting and channel financing solutions to fit our client’s purposes best. 

2. Review the internal processes

Supply chain financing programs would require an exchange of data with financial partners and real-time visibility of invoices financed and settled. It is vital to review your internal processes and systems to align them with the program structure such that it’s easy for internal and external stakeholders. 

A company’s sales or purchases and finance teams will be internal stakeholders to such financing programs, whereas sellers and financiers will be external stakeholders. Aligning internal processes to facilitate the seamless exchange of verified data helps ensure the program’s scalability to many channel partners. 

3. Keep communication channels open. 

The success of your Supply Chain Financing program entirely depends on increasing reach and ensuring maximum channel partners get onboard the financing program. To achieve this, ensure collaboration between your sellers/buyers and your external and internal stakeholders by openly communicating the program’s benefits.

Open and transparent communications also help build trust and strengthen the trade relationships between channel partners.

At Tata Capital, we make an effort to partner with our corporate anchors and help channel partners understand the process, the impact or consequences of such financing, and their options to seamlessly transition into the financing program without disrupting their current operations.

Additional Read: How Can Channel Financing Help You Manage Your Supply Chain Better

4. Minimise barriers to onboarding

Given that the financing is in addition to a channel partner’s regular trade transaction, it is crucial to keep the onboarding process prompt and straightforward. The process should be effortless and the documentation minimal. The cost of financing should be as low as possible for the borrowers, and financiers must integrate the whole process with the corporate anchor’s ERP systems. 

By minimising barriers to onboarding, treasurers can ensure maximum participation in supply chain financing programs from channel partners and achieve the goals set out.

5. Leverage technology

Streamlining supply chain financing programs require integration between the ERP system of the anchor with the financier to facilitate ease in the exchange of information between all stakeholders. Additionally, utilising technology can automate processes to ensure lesser bandwidth of the finance and procurement/ sales teams are used up in facilitating such transactions. 

Leveraging technology can help automate processes, reduce costs, improve accuracy, efficiency, and enhance user experience across stakeholders.

Additional Read: Building a resilient supply chain through channel financing

Over to you

Supply Chain Financing is an incredible avenue for corporates to maximise returns on working capital without jeopardising the interests of their supply chain partners. Yet, its successful implementation demands a significant amount of commitment from all the parties involved.

Tata Capital extends favourable early payments solutions with flexible product structuring to support unique trade relationships across industries. Get in touch with our representatives to know more. 

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