In today’s fast-paced and rapidly changing world, it is more important than ever for businesses to be flexible and adapt to changing market conditions and dynamics.
Supply chain finance is an example of this. Greater flexibility in payment terms and solutions has become increasingly important to buyers navigating challenges caused by widespread global disruptions in recent years.
However, this is often easier said than done. Flexible financing solutions with global scope typically involve a complex financing structure, multiple local IT providers as well as accounting teams and, most importantly, procurement teams involved. This takes time to set up and can make it difficult for both banks and non-bank payment providers to provide instant results and flexibility in financing solutions.
Orbian’s response has been to pioneer payment on terms, a solution focused on improving balance sheets without involving procurement or suppliers.
In short, Pay on Terms enables service providers to pay suppliers on the due date and offers buyers a payment period to pay for the Orbian service. This protects buyer liquidity while improving working capital – and without involving the supplier.
Make payments more predictable
One of the key differentiators of such a solution is to give global companies the predictability they want in their cash flow planning.
Historically, the cash flow impact of a supply chain finance program has been predicted by estimating how the purchasing team negotiates payment terms with specific suppliers to meet specific working capital goals. However, this often leads to incorrect forecasts because changing market conditions, supplier dynamics, customer demand, or simply resources lost in procurement can make it difficult for buyers to predict outcomes.
Paying on terms as a solution takes the supplier and purchasing process out of the equation and instead puts the buyer’s treasury team in control.
If the treasury team controls the volume that goes through payment solutions on terms, rather than requiring approval from the supplier or calling on the procurement team to renegotiate payment terms, the buyer can benefit from greater predictability in working capital.
Digitization can also play a key role in creating more predictability in finance. Orbian achieves this by partnering with a data analytics platform to use artificial intelligence (AI) to predict the outcomes of buyer-supplier negotiations before they happen.
Based on data on the payment terms accepted by a particular supplier or a peer supplier in the market when dealing with different buyers, AI can recommend the buyer the best ways to approach the same supplier. As a result, the outcome becomes more predictable.
Create a synergistic solution
Two long-term benefits accrue when payment solutions are more flexible and predictable.
First, a particular supply chain finance program that is more flexible is better equipped to overcome challenges. Then it should grow larger and last longer. Second, and perhaps more importantly, there will be less resistance to creating a new program.
Setting up new software is often difficult because multiple stakeholders are needed, and procurement, treasury and IT teams need to agree. There is a significant and undeniable benefit from a solution that allows the cashier to meet working capital requirements while giving the procurement team more time and specific direction to negotiate with suppliers.
