Benefits of a Working Capital Solution
For suppliers, both supply chain finance and dynamic discounting result in:
- Increased cash flow (supplier decrease DSO)
- Enhanced cash visibility/predictability
- Access to an additional source of funding
- Reduced financing cost depending on credit rating
- Off-balance sheet financing that doesn’t impact supplier debt metric
- Remittance information at no cost with reduced account receivable queries
For buyers, the benefits of supply chain finance and dynamic discounting differ slightly. Both programs result in enhanced cash visibility/predictability, reduced account payable inquiries and improved critical supplier relationships. Supply chain finance also increases free cash flow and can reward bank relationships, while dynamic discounting can increase the risk-free return on short-term cash investments substantially, improve gross margin and reduce COGS.