Beyond the Approved Invoice: How B2B Networks Can Enable Event-Triggered Trade Finance

From a financing perspective, having an approved invoice from an investment grade corporation is the equivalent of having an emotionally intelligent and highly responsible son or daughter graduate from Harvard Business School or Wharton. The combination of factors is a strong predictor of a successful financial outcome in the future. But few of our children will achieve all of these elements together – the same is true of all of the individual triggers available for trade financing as well.

In the last post in this series, based on a recent white paper, “On-Demand, Event Triggered Finance With Network Models – A Game Changer?,” authored by my colleague David Gustin, we introduced 6 different financing triggers: signed contract, purchase order issuance, materials ordered by supplier, verification of shipping status, invoice issued but not approved (also known as non-confirmed invoice) and invoice approval.

As David observes, “The thought behind event-triggered finance is that the events can be used across a supply chain to reduce the cost of financing … today, there are multiple fragmented spend markets and many flavors of B2B networks that support the buy-side “source to pay” space. Several of these providers are readying new network capabilities, including master data management (of supplier data) as a service, compliance, auditing/assurance, risk management, social connectivity, predictive analytics and even more advanced financing capabilities (including early models for the relatively secure financing of unapproved invoices).”

With more advanced configurations today, networks can enable financing across these 6 orders. Consider a scenario where “a platform reconciles invoices to original purchase order … [and] allows for partial shipments.” Or what about cases in which “supplier managed inventory held by [a] supplier until drawn by buyer” could trigger financing, not to mention other events (e.g. “customs release, goods inspected, etc.”).

The future of business networks, supplier networks and P2P platforms and their intersections with trade financing is significant indeed. To learn more, 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.

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