Multinational corporations with regionally dispersed and large supply chains are expanding growth opportunities with supply chain finance programs. By supporting their suppliers with better terms and faster payments in a way that doesn’t impact working capital allocation, senior finance leaders are better able to manage a complex supplier network. Modern CFOs are turning to their treasury team, who manage the funding of payments to their suppliers, for technology enabled solutions that deliver supplier payments on a secure platform to reduce risk and generate free cash flow.
According to Kyriba’s Global Head of Working Capital Solutions Edi Poloniato, “globalization requires the implementation of technological solutions that are able to securely manage transactions in a multi-country, multi-bank and multi-currency context.”
Payables financing (reverse factoring) success story
Accessible-fashion company Pimkie handled purchases of more than €230 million from 200 plus suppliers in Asia, Europe, Maghreb and Turkey every year using letters of credit. The process to manage the payment of suppliers was time consuming and included a substantial amount of errors.
Additional reading: Strengthening Supplier Relationships with Reverse Factoring
Group Treasury Manager for Pimkie Gregory Ambrosio recognized a need for change. “We wanted to offer our suppliers an alternative solution while significantly improving funding timelines,” said Abrosio.
Pimkie selected Kyriba to provide the technology platform to manage the supplier payments with a payables financing (reverse factoring) program. The project mobilized several departments, including Corporate Social Responsibility (CSR), Purchasing, Accounting, Supply and IT, thereby enabling internal processes to be optimized.
Pimkie is now on track to achieve working capital improvements of around €12-€15m per year once the program is fully operational. Suppliers, meanwhile, receive payment 14 days earlier than they did when using letters of credit, enabling Pimkie to strengthen key supplier relationships. Additionally, suppliers have full visibility of approved invoices and are able to select early payment of one or more invoices, with more attractive rates than short-term financing.
Pimkie’s approach to enhancing working capital with payables financing programs is a shining example of how modern senior finance leaders are taking on the challenge of globalization and winning. Read the complete success story to gain additional insights on how Pimkie set up its program to support their CSR initiative, how they onboarded their clients, additional ROI data and the future plans for the company.