A couple of weeks back, I authored a post on Spend Matters, “Die Factoring, Die,” which was also picked up my colleague, David Gustin, on Trade Financing Matters. The essay attempted to address a serious topic in a humorous, somewhat satirical way, starting with a title that was intentionally overboard. In my attempt to have a bit of fun with the topic of factoring, I failed. I offended a number of people in the factoring community with my language and metaphors.
The Trade Financing Category
Hitachi may be best known for producing a huge range of products, from Shinkansen bullet train cars to the most reliable hard drives to the Magic Wand, but under the hood of the massive global organization and its many divisions, there are individuals doing some crucial, if unsexy-sounding, work. As vice president and general manager at Hitachi Capital America Corp., Tom Cross builds out trade and supply chain finance programs for Hitachi companies and third parties. We caught up with him in an email conversation to get his take on the current landscape within the supply chain finance (SCF) sector.
Spend Matters welcomes this guest post from Tom Levene, of The Hackett Group.
Do you pay your suppliers too quickly? New research by The Hackett Group has indicated that 32% of respondents are planning to extend their supplier payment terms. Additionally, our benchmark studies show that many organizations trail industry peers in the key supplier cash flow measure, days payable outstanding (DPO). In these organizations, responsibility for payment terms often spans multiple functions with differing priorities or the value of working capital is not well appreciated. Pursuing a payment term extension program with suppliers can unlock value in your supply chain, but to maximize this value, preparation is key.
There is a major opportunity for cloud-based, e-commerce platforms to leverage seller-centric distributor finance with OEM manufacturers. This ‘alternative version’ of distribution finance is also suitable for many industries, as David Gustin, editor and co-founder of Trade Financing Matters, recently wrote in an article on Spend Matters, OEM Distributor Finance: The Next Frontier. Yet it’s an opportunity too few are taking advantage of.
Trade Financing Matters sees great potential for cloud-based e-commerce platforms to leverage a seller-centric version of distributor finance in OEM dealer/vendor/distributor structures. In this arrangement, the OEM functions as the “middle party” working with its dealer/vendor/distributor network and its network of end buyers (or accounts) to manage invoicing, matching, price validation, dispute management, credit and collections, payments to its dealers and collecting receivables from national account customers.
Last week Oracle announced it would acquire Textura, a provider of cloud-based construction management software, for $633 million. In an article published on our sister site, Trade Financing Matters, members of the Spend Matters Analyst Team took a look at what the deal means for both companies. It’s a “stiff price” for Oracle to pay for Textura, the team wrote, but its offerings will complement Oracle’s existing product line.
Spend Matters and Trade Financing Matters have teamed up to explore the opportunity present for connected, seller-centric platforms to facilitate data and document flow that offers liquidity and working capital. Presenting the complimentary research download, Distributor Finance – A New Take on an Untapped Market by David Gustin, editor and co-founder, Trade Financing Matters. Download it today!
SAP Ariba announced a partnership Wednesday with PrimeRevenue to add “a multifunder supply chain financing platform” to its integrated source-to-pay (S2P) process. SAP Ariba said the partnership will combine transaction and financial supply chain data to better link procurement and finance organizations. PrimeRevenue provides a cloud-based supply chain finance solution. The Atlanta, Georgia-based company reportedly manages $120 billion in transactions annually and has more than 20,000 clients in more than 70 countries.
Spend Matters welcomes this sponsored article from Sean Van Gundy, managing director, working capital advisory at C2FO.
Payment terms standardization, terms extensions, P2P automation and dynamic discounting programs are all trending topics with global corporates these days. These tactics can be effective at improving payables value, but what’s the best strategy to achieve your desired results?
In February, Arrowgrass Capital Partners, a London-based asset manager, announced it acquired Oxygen Finance. The acquisition is curious, in part because of the existing Arrowgrass and Basware partnership and Oxygen’s unique model, which we explore in this analysis. Oxygen currently has “billions of pounds” flowing through its infrastructure annually, primarily from U.K.-based public sector clients, yet it is not a P2P or e-invoicing vendor like most other providers focusing on discounting. Nor is it like C2F0, which focuses on creating loosely coupled — from a transactional systems perspective — competitive markets that provide greater flexibility to suppliers around participation compared with Oxygen. This multipart Spend Matters PRO brief delves into the Oxygen Finance solution in detail and explores a number of questions that Oxygen and the acquisition raise. These include whether or not the deal signals that additional private funds are likely to make more investments and buyouts in the sector. (Note Zouk investing in Taulia recently.) More important for users, we provide our analysis of the Oxygen Finance model, which is theoretically based broadly on a closed loop buyer network with its suppliers, and whether it might be able to gain the same type of discount scale and supplier adoption that new e-invoicing led trade financing models of the sort Taulia is bringing to market with its SCF+ are hoping to achieve through an alternative means. Finally, we analyze the days payable outstanding (DPO) and working capital impact Oxygen can have in comparison to alternative approaches — and why the public sector appears the most fertile ground for the solution approach.
Reverse factoring programs require a careful internal process orchestration that must include procurement, accounts payable, treasury and executive leadership to be successful. During an outstanding panel discussion led by The Trade Advisory’s Tony Brown at the CFA’s Supply Chain Finance/Factoring World event in Miami last week, two panelists, Kyriba’s Eric Riddle and Wells Fargo’s Stephen Elson, provided contrasting examples of what successful and poorly performing reverse factoring programs look like.
In the first installment in this series, we provided our own recent history lesson on Taulia and how it got to where it is today — and the crossroads it currently faces from a strategy perspective. As we wrap up our Spend Matters PRO update on Taulia, we explore a number of specific areas of its business today, including a deep dive into its SCF+ offering, a tech-enabled and simplified approach to reverse factoring for the long-tail supplier masses instead of just large vendors. We also explore how Taulia is currently positioning itself today as it engages customers and how, on many levels, its core offering is a Trojan horse for what it really wants to sell with partners (but why that foot in the door with procurement, IT, accounts payable and treasury is an important as a first step and how these different worlds are converging). Granted, it would be easy — and not incorrect — to observe that the broader e-procurement market and purchase-to-pay (P2P) market remains distinctive from Taulia’s core sector today. Yet going forward, one can make the case that the worlds of generic (indirect) and category-specific buying, transactions, financing and payment will come together. And this is where understanding Taulia's emerging strategy matters.