Beyond Invoice Discounting and Dynamic Discounting Alone: 6 Triggers for Receivables and Payables Financing

I sometimes tell people that we’re in the top half of the first inning, with the lead-off hitter on plate, to describe where we are in the evolution of purchase-to-pay (P2P), supplier networks, business networks and trade financing. And the first pitch we’ve tossed to the plate is the approved invoice (net of dilutions) as the trigger for online-driven financing. This is the premise behind financing-centric network and e-invoicing providers like Tungsten and Taulia.

Free Research Report: A Supply Chain Finance Game Changer

But e-invoicing is only a single trigger – the slow fastball thrown right down the center of the plate for a called first strike. As our game progresses, we’ll see more – and arguably better – pitches thrown. In fact, we can point our fingers to 6 triggers for receivables and payables financing programs today. In the paper, “On-Demand, Event Triggered Finance With Network Models – A Game Changer?,” my colleague David Gustin explores these in more detail, noting that these “information-based actions for supply chain finance … can be used to trigger liquidity”:

  • Signed contract
  • Purchase order issuance
  • Materials ordered by supplier
  • Verification of shipping status
  • Invoice issued but not approved (also known as non-confirmed invoice)
  • Invoice approved

It’s actually quite a long list – and long as well in potential duration of periods in which to finance (potentially years over a single contract). Yet as David notes, “In our ongoing discussions with practitioners and providers, we’ve found that no bank, finance house, technology provider, B2B network provider, or logistics company is active in more than one or two trigger points for finance.”

And, of course, approved invoices are leading the way today. But this presents a whole host of challenges, which we’ll explore as our investigation continues.

Download David’s full analysis here. We also encourage you to investigate our deep, subscription coverage of trade financing, invoicing discount and P2P on Spend Matters PRO.

In addition to Spend Matters PRO research, David and Jason offer workshops, lectures and advisory services to corporations, banks, private funds, consultancies and technology providers that want to learn more about the trade financing ecosystem and its intersections with new technology products and platforms. Contact them directly to learn more: jbusch (at) spendmatters (dot) com or dgustin (at) tradefinancingmatters (dot) com.

Discuss this:

Your email address will not be published. Required fields are marked *