Buyer-Driven Finance Programs driving Suppliers Wonky


Can Suppliers handle multiple pcard, supply chain finance and dynamic discounting programs?  That is increasingly becoming an important question.

In today’s exciting world of Buyer-led finance, one must remember that companies do not just sell to one buyer. In fact, a company could sell to multiple buyers that have multiple early pay solutions going. Imagine trying to participate in a marketplace from C2FO, pcard programs from various bank providers, early pay discount programs from Taulia and Ariba, and seven supply chain finance programs. Think that’s not the norm?   It is increasingly becoming the norm for companies if they want to access early pay.

While in isolation, these programs may offer tremendous value, taken together they can involve adding headcount to monitor.   So you sell to Costco, Walgreens, and CVS, plus Nestles and Heinz and all of a sudden they are all saying you can join my supply chain finance program. You look at them and say – that’s five programs with different platforms, different funding partners, structures, etc. I am also on a pcard program with 5 buyers, and doing some discounting via a few other vendors. I am going crazy?

I know of an aftermarket auto retailer that has 7 domestic supply chain finance programs going, mostly to satisfy their relationship banks by parceling out a piece of the action. Another paper packaging company has 8 programs running. What if you are a supplier to one of these companies and none of the banks selected are your banker? True, it doesn’t matter to these banks because they are purchasing the receivable and will do their due diligence and UCC filings (at least in the USA) but it could matter to the supplier. They do not have a relationship to call when they want to discuss something. At some point, the company is going to say why not just put a lending facility in place as opposed to all these early pay solutions? I have great receivables, or use a program that will fund any of these receivables at attractive rates and NOT be Buyer-driven.

The other challenge is that for many solutions, only a few suppliers are onboarded. So a large corporate may have started an American Express Buyer Initiated Payment program, or V PAY in Europe by Visa or some bank’s pcard program, but only set up a few suppliers to receive that pcard, so that leaves the corporate with only a few suppliers to pay by pcard and a unique process to manage. That has multiplied across the enterprise but now they have multiple payment processes to manage.

What do others see and think from the suppliers perspective?  Is this another reason why supplier onboarding is so hard?

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