In today’s fast-paced and fast-paced world, it has become more important than ever for businesses to be agile and adapt to changing market conditions and dynamics.
Supply chain finance is a good example. Greater flexibility in payment terms and solutions has become increasingly important for buyers facing the challenges of widespread global disruption in recent years.
However, this is often easier said than done. Resilient, global financing solutions typically involve a complex financing structure, multiple local IT providers as well as accounting teams and, most importantly, involved procurement. This takes time to set up and can make it difficult for banks and non-bank payment providers to offer immediate results and flexibility in the financing solution.
Orbian’s response was to launch payment with conditions, a solution focused on improving balance sheets without involving procurement or suppliers.
In short, payment with terms allows suppliers to pay suppliers on the due date and provides buyers with payment time to pay for the Orbian service. This protects the buyer’s liquidity while improving working capital – and without involving the supplier.
Make payments more predictable
A key differentiator of such a solution is to give global businesses the predictability they want in their cash flow planning.
Historically, the cash flow impact of a supply chain finance program was predicted by estimating how the procurement team negotiated payment terms with certain suppliers to achieve specific cash targets rolling. However, this often leads to incorrect forecasts, as changing market conditions, supplier dynamics, customer demand or simply lack of resources in purchasing 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 puts control in the buyer’s treasury team.
If the treasury team controls the volume flowing through conditional payment solutions, rather than seeking approval from a supplier or using the procurement team to renegotiate payment terms, then a buyer can benefit from greater predictability of working capital.
Digitalization 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 regarding the payment terms that a certain supplier or 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.
Create a synergistic solution
Two longer-term benefits materialize when payment solutions are more flexible and predictable.
First, a particular supply chain finance program that is more flexible is better equipped to meet the challenges. It should therefore grow bigger and last longer. Second, and perhaps more importantly, there will be less resistance to creating a new program.
Implementing new programs is typically difficult given the need to involve multiple stakeholders, and procurement, treasury and IT teams all need to be on the same page. There is a clear benefit to be gained from a solution that allows a treasurer to meet working capital needs while giving the procurement team more time and specific guidance to negotiate with suppliers.
