Access to liquidity and working capital management are top of the agenda for corporates in these testing times. Even though interest rates are at an all time low, Corporates are finding it difficult to readily access capital to assist them in their day-to-day operations.

There are many ways a corporate can improve their cash liquidity and optimise their working capital requirements. These range from simple operational improvements, like introducing E-Invoicing to utilising supply chain finance for on-demand access to capital at competitive rates. 

Improve Receivables Collections & Forecasting: Improving visibility of the status of future receivables leads to more accurate forecasting and consequently a reduced need for working capital buffers. Receivables forecasting can be significantly improved across the Enterprise through a number of mechanisms including E-Invoicing, payment reconciliation and the use of Direct Debits

Reduce Day Sales Outstanding: Significant reductions in DSO can be achieved through operational efficiencies and receivables automation. Even reducing the DSO by a few days provides Enterprise with additional working capital whilst at the same time reducing their costs.  Facilities such as E-Invoicing portals, payment integration, on-line dispute resolution, automated reminders, etc all drive down DSO and increase cash collections. 

Improve Payables Control and Forecasting: Being able to accurately forecast future payables again results in better working capital predictions enabling more capital to be released for investment or to fund growth. Procure-to-pay automation and good Enterprise wide cash management practices help optimise the payables process. 

Finance Receivables – Invoice Discounting: Short term financing can be provided to the corporate on the strength of their future receivables.  With best practices in place utilising E-Invoicing for receivables,  a corporate can readily share their receivables data with third parties  to enable efficient, immediate and  cost effective working capital financing. 

Finance Receivables – Invoice Financing: Dematerialising business processes makes it easier and more cost effective to trade in receivables.  A corporate in need of finance to fund rapid growth - where there is a potentially catastrophic lag between production costs and receivables for example - can sell their receivables for collection by a third party.

Payables Financing:  Increasing Days Payables Outstanding  (DPO) and reducing  DSO increases the availability of capital for the business.  Payables financing mechanisms enable financing to be offered to suppliers for approved payables transactions - at a rate which is determined by the creditworthiness of the buyer.  Perfect for the large buyer in providing cost-effective financing for their supplier base. 

Early Payment Discounts:  A simple and effective payables financing mechanism where suppliers elect to advance payments in return for agreed discounts. Can be funded by the bank - or  packaged as an investment vehicle for corporate cash. 

Bank Benefits

There are significant benefits for Banks in providing these services to their corporate customers. These include :-

• Extend reach of bank services to their client’s trading counter-parties
• Lowering the risk of financing because of increased visibility and granularity in line with business transactions.  
• Traditional LC based trade finance in long term decline - banks must get involved in open account financing mechanisms to remain in the market.
• These service enable banks to be  more deeply involved in the clients financial supply chain.
• Stronger corporate relationships based on fulfilling corporate demand
• Improved customer loyalty and retention
• Wider breadth of open account financing services to remain relevant and competitive
• The continual and unstoppable dematerialisation of business processes opens up new opportunities in automated finance and offering services at a more granular level
• Facilitate client growth, leading to increased demand for other bank services