Category Archives: Accounting Treatment

The Blurring of Supply Chain Finance Definitions

I often get this question about how factoring and supply chain finance differ from traditional invoice finance. And the real answer is its very murky. There is certainly a blurring between invoice finance, invoice discounting, factoring, supply chain finance and asset-based lending.

By whatever name you want to call it, what really matters is what usury laws are governed by the lending technique and how bankruptcy court will interpret the structure (loan, asset purchase) and what the state or legal jurisdiction laws are in relation to the technique. Definitions are fine to help educate and illustrate, but they are meaningless when it comes to judges and investors.

Supply Chain Finance: Gray Area Abounds on Early Pay Programs, Accounting

Whichever way you look at it and define it, supply chain finance has grown into a big number. And if you define it as using the balance sheet of a large company to offer early payment to some or all of its suppliers, it is has gained in popularity. Plus, it’s not only offered by large banks who can both originate and distribute large-scale programs for the likes of Unilever or Procter & Gamble, but also non-bank asset arrangers like Greensill, Seaport and others working together with source-to-pay platforms or directly with buyers to develop programs. And always in the background we have heard this whispering of accounting treatment. And by now, most people who have dabbled in this space know the issue: Is it trade payable or is it debt? Fewer understand the implications.

German Body Rules on Accounting Treatment for Supply Chain Finance

Recently the IDW, the privately organized supervisory authority of all accounting and audit firms in Germany, produced a ruling around supply chain finance and accounting […]

Infrastructure & Business Finance – Accounting Layer Key Motivator

Last week, as part of the Infrastructure Layer, we looked at Regulatory and Legal issues that support trade credit. There are other important infrastructure issues […]

How to Account For Self Funded Early Payment via Dynamic Discounting

As more companies adopt early pay programs, including self-funded and third-party supply chain finance (“SCF”) programs, it’s important to understand the accounting implications of all […]

Finance and Procurement: Where Do Savings Come From?

Many organizations believe that savings originate from a good contract. However, all that results from a good contract is a negotiated rate, not an actual rate. Savings only materialize if the contracted rate is the rate that is actually paid by the organization. The rate needs to be updated in both the supplier billing system and in whatever system the organization uses to track contracted rates, and accounts payable (A/P) has to insure that the rate paid is the correct one.

Reframing Accounts Payable — A Function in Need of More Than Botox

e-invoicing

I believe accounts payable (A/P) is a sector, and profession, in dire need of a remake to get the respect and attention it deserves, similar to how procurement has been gathering steam for well over a decade. Why? I’ll share a few quick thoughts and invite others to chime in.

Should Corporations Invoice in Renminbi?

You increasingly hear reports that the renminbi (RMB) is becoming an international settlement currency with China. According to SWIFT transaction data, it is now the […]

Accounting issues with Dynamic Discounting programs

With the explosion of early payment solutions to assist a buyer’s supplier group (egs. dynamic discounting, reverse factoring) and the start of receivable auction markets, […]