With a number of providers who offer supply chain finance in an integrated cloud environment, invoices can be uploaded virtually to allow the supplier to see its status—whether it has been approved and if any credits have been applied—before opting to sell that invoice at a discount; or set up business rules to manage their working capital.
Additionally, a number of new regulations continue to be set forth to improve cashflow and control working capital management for the buyer and supplier. In the fall of 2012, United Kingdom Prime Minister David Cameron announced a new initiative designed to enable and protect increased levels of SCF—despite already raised payment concerns. A number of companies already agreed to provide cheaper SCF to their small business suppliers as a means of supporting their supply chain.
For Tipalti, which works to protect the payers in the supply chain, the need for supply chain finance management is crucial.
“All of our customers are very concerned and attuned to what is happening on the global supply chain side,” said Eran Karoly, Vice President of Sales and Marketing for Tipalti. “If a company has a supply chain that is only in the U.S., solving payment problems are much easier. But if the supply chain spans the globe, then as the payer in the supply chain, you need to adhere to the issues, rules and regulations happening on the other side of the ocean. The real challenge is with the medium and the small-sized businesses or the start-up businesses that don’t have the resources, the expertise and the know-how to deal with the changing regulations that they still need to adhere to.”
Yet, while it is important to understand the regulations governing finance in a particular region, Karoly advised not to become too focused on such aspects; and instead align with a partner who is well-versed in such areas—allowing your business to focus on its growth and market strategies.
“Companies should try and focus on their core business and not try to become an expert on local rules and regulations in each country in which they have a supplier,” Karoly added. “Because, the list just keeps growing and the regulations in each and every country are constantly changing and you’re going to need significant resources in chasing this problem. Use a service, a solution or a company that specializes in the global aspects to provide you with that expertise and help. And that, of course, is a valid recommendation to companies especially which are either starting up or small or medium-sized and don’t have the resources available to them to manage this in-house,” he explained.
The Financial Services Act—to commence on April 1, 2013—implements the following reforms of the current regulatory system, according to the UK’s HM Treasury:
- “Establishes a macro-prudential authority, the Financial Policy Committee (FPC) within the Bank of England, to monitor and respond to systemic risks;
- Clarifies responsibilities between the Treasury and the Bank of England in the event of a financial crisis by giving the Chancellor of the Exchequer powers to direct the Bank of England where public funds are at risk and there is a serious threat to financial stability;
- Transfers responsibility for significant prudential regulation to a focused new regulator, the Prudential Regulation Authority (PRA) established as a subsidiary of the Bank of England;
- Creates a focused new conduct of business regulator—the Financial Conduct Authority (FCA)—which will supervise all firms to ensure that business across financial services and markets is conducted in a way that advances the interests of all users and participants.”
“We see governments getting involved in the form of financial support, either through direct lending or credit backing of a bank that does the direct lending,” said Eric Riddle, Vice President and General Manager, Europe, PrimeRevenue Inc. “We see this in Canada with the EDC. We see this in the U.S. in the form of Ex-Im—the Export-Import Bank of the United States. We see governments responding to what they see in terms of these restrictions on working capital access. Corporates are really starting to look at supply chain finance as a viable access point to working capital that can be used for multiple reasons.”