A/P Series Part 4: The Why
Welcome back! This is part four of a six-part series focused on how you,
The fundamental question to ask is, “Why do most suppliers offer a discount in exchange for early payment?” The obvious answer is: they need cash now to pay for their short-term working capital needs – payroll and supplies. But suppliers’ customers don’t want to pay as fast as possible, for the same reason suppliers want their money – the suppliers’ customers need cash now to pay for the same short-term working capital needs. Therefore, basic economics concludes that suppliers must incentivize early payment if they want their buyers to pay early. However, even with incentives, many companies are either unwilling to pay early or are unable to do so. This results in trillions of dollars locked in A/R and A/P, working capital, the supply chain – whatever you want to call it.
How do we unlock and access these trillions of dollars
- You, the bank/lender, offer the Supply Chain Financing program, providing clients the opportunity and ability to hold onto their cash while simplifying their cash management and payment processing – win.
- Plus: Your clients put their suppliers in control of their accounts receivable, giving them the option to select early payment on any approved invoice (the very thing they have been incentivizing and asking for!) – win.
- Plus: When suppliers request early payment, you pay on your client’s behalf and realize the early payment discount (which you can share or not with your client) – win.
- Equals: Supply chain finance for the hattrick, win-win-win.
Supply Chain Finance has been used for decades by Fortune 500 companies. Unfortunately, size, technology, cost
For more information, contact the Artis Trade team via email at email@example.com.
Robyn Barrett is a founder of Artis Trade Systems and the managing member of Factors Southwest, LLC, (dba FSW Funding) an independently owned and operated factoring firm. She helps small to mid-sized business-to-business companies secure funding that may not otherwise be available. By giving them access to the capital needed to grow, FSW Funding is helping shape the business community.