Global Finance: What are the key trends in supply chain financial innovation?
Maureen Sullivan: One belief in supply chain finance [SCF] Society is constantly evolving, and banks are always looking for ways to help customers manage their supply chain finances through continuous product development and innovation.
One trend is to incorporate supply chain finance early in the cycle, during product transportation or pre-manufacturing. For example, inventory financing has been a hot topic lately. One of the lessons companies learned during the pandemic was the need to have the right product in the right place, but this means deploying multiple sourcing locations or having buffer stocks . Terms like “near sourcing” and “nearshoring” have become mainstream terms. Companies facing the impact of inventory buildup on their balance sheets are seeking relief through inventory financing techniques.
Another example would be purchase order financing, where predictability is key to making such a product truly scalable. And this is where I think artificial intelligence and machine learning can add value in their ability to analyze vast amounts of data and make more accurate risk assessments. Banks need transparency, performance and predictability as they are regulated differently than fintechs. So, for example, if a buyer works with his five suppliers, and an AI could predict that every time this company places an order he will get paid 99.999% of the time, then perhaps the bank has a solution. may be willing to provide.
Green supply chain finance is growing, with a focus on sustainability and green sourcing. While companies look for ways to incorporate green finance principles into their operations, banks are offering sustainable SCF solutions that provide financing incentives through ESG scoring to encourage positive supplier behavior.
GF: How does SCF empower small businesses?
Sullivan: Small businesses have a unique set of challenges in managing cash flow. Given its size, traditional financing options such as loans and lines of credit can be more difficult to access. But you need a ready source of liquidity that you can access as needed without incurring additional debt or other financial obligations.
Solutions like Dynamic Discounts provide this flexible financing option, allowing small businesses to receive early payments from customers in exchange for offering invoice discounts. It also strengthens relationships between small and medium-sized enterprises and their customers, making them more attractive to buyers, improving supplier-buyer relationships and gaining competitive advantage, especially in industries where quick and efficient transactions are valued. brings the possibility of bringing about.
A cost-effective way for small businesses to access working capital, use these early payments to improve cash flow, cover operating expenses, invest in growth, and time-sensitive opportunities. You can take advantage of it.
GF: How do you help your clients address SCF regulations and compliance?
Sullivan: We operate in a regulated industry and compliance is one of the key cornerstones of our supply chain ecosystem. All transactions passing through our platform are scanned to ensure compliance with regulatory requirements.
Regarding regulatory status and Financial Accounting Standards Board review [FASB] The ruling requires companies to disclose the terms and obligations of their major SCF programs in their quarterly and annual balance sheet reports. We create reports, upload them to our buyer portal, and store them for our customers to use when needed. These reports provide a second source of data for the client who wants to see the numbers before reporting, like an “audit confirmation”. We have also developed a series of educational resources to help our clients understand what this FASB update means for their buyer-driven programs. On the compliance side, as a bank, you need to ensure that you are aware of all parties involved in any transaction.US federal law requires financial institutions to “know your customer” [KYC] This process requires us to obtain, verify and record information about each organization or individual seeking to establish a business relationship and/or open an account with us. The goal of KYC is to prevent banks from being used, intentionally or unintentionally, for money laundering, terrorism, and other illegal activities. We ensure that all necessary compliance procedures are followed when companies work with us.