Supply Chain Finance

When KPN, a Dutch telecom giant decided to extend how long it took to pay suppliers it know it would not be a popular decision. As today, it moved its payment terms from 45-90 days; it looked into a mechanism called supply chain finance, in other words, the lengthening of payment terms, which is a negative thing for suppliers. So they were looking on a sweetener to smoothen the implementation and found this. Several analysts see supply chain finance as a great hope for easing problems with suppliers during the current recession.
The superior idea behind supply chain finance is the crucial importance of the allowance of the supplier to sell its invoices to a bank at a discount as soon as the buyer approves them. Furthermore, that allows the buyer to pay later and the supplier to secure its money earlier. Instead of relying on the so to called creditworthiness of the supplier, the bank focus and deals with the buyer – usually in many occasions the less risky prospect.
KPN, Nestle’, Sainsbury and Volvo Trucks are among a number of companies to use supply chain finance, a tool for them especially Volvo; not to call for emergency loans from the state.