Supplier Onboarding – Dont shortshift Execution Part I

Trade Financing Matters will examine Supplier Onboarding in a series of four posts.

The term supplier onboarding, like the term “supply chain finance” means different things to different people. For some, onboarding basically means get as many suppliers to accept my (einvocing, supply chain finance, dynamic discounting, pcard, etc.) program as possible. For others, it’s an elaborate process to manage “know your customer” by doing the necessary things to comply with regulations about opening accounts for new customers. For others, it can mean the analytics that are used to analyze and segment suppliers for a particular program.

I would in fact go further, and say not only is onboarding all those things, it is comprised of a front, middle, and back office.

Lets be clear. I am specifically speaking about onboarding suppliers to enable some early pay finance technique. Obviously as part of that, sometimes eProcurement solutions are involved, sometimes eInvoicing, and sometimes more extensive supplier networks.

The reverse factoring or supply chain finance programs that have been rolled out for large investment grade companies have seen their fair number of onboarding challenges which has limited the success of many programs. Here are a few:

  • Front Office - Suppliers need compelling reasons to accept money from their Buyers, so there was a real void in managing the negotiations/sale of money. In selling solutions, Banks and vendors must navigate multiple decision makers at a supplier candidate to understand that institution’s decision drivers and highlight the advantages of their program versus other financing options.
  • Middle Office – supplier platform training may sound intuitive, but as we all know from using both good and bad web platforms, the user interface matters. In addition, the IT connectivity, APIs, ERP push/pull, and security can be critical.
  • Back Office - These programs typically cross borders, and involve complexities in the back office areas (KYC, AML, lien searches, etc.). Companies also typically do not harmonize their Supplier Master data globally, from basic TIN numbers to other hard data validations.

In the past, poor bank implementation has led clients to criticize their banks as having endangered their supplier relationships. For example, emailing or sending clients letters can be a callous and ineffective method. While you can automate many things, when selling money sometimes suppliers need more hand holding. Selling money involves a complicated sale; decision makers at suppliers varies so much by size and type of supplier.

Ultimately onboarding ‘s success is really measured in three ways:

  1. Success rate onboarding suppliers you targeted
  2. Success rate in having suppliers use the service
  3. Retention rate after a period of time


Any effort to onboard 500, or 1,000 or 10,000 suppliers is a serious undertaking and understanding this from the Suppliers' perspective and the constraints they have in place is critical.

For example, in reverse factoring programs, even if suppliers are attracted to cheap Libor priced money, they still should get an outside auditor opinion to ensure the receivable is “true-sale” and complies with FAS-140 - Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.

In the next several posts, I will look at some of the front, middle, and back office functions that need to be completed, the third party vendors that can assist here and is there really something like a best practice.

p.s. if you would like to receive a summary of Trade Financing Matters posts every Monday, sign up here


In addition to Spend Matters PRO research, David can provide onboarding benchmarking and diagnostic work to help organizations better understand onboarding resource requirements to make supplier onboarding both more effective and more efficient. Contact him directly to learn more: dgustin (at) tradefinancingmatters (dot) com

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