Basware Advance – an Innovative New Supply Chain Finance Product

Basware, the leading e-invoicing and purchase to pay solution providers, has announced a significant new supply chain finance product today. Basware Advance is the latest innovation in Basware’s Financing Services product suite, following previous launches of Basware Pay (a buyer-driven supply chain finance product) and Basware Discount (dynamic discounting).

Using the Basware Advance supply chain finance (SCF) solution within the Basware Commerce Network, suppliers can send e-invoices, see the status of invoices, ask for details of financing available via early payment, sign the agreement and use the dashboard to track the status of the financing. The process enables them to receive payment within days, maintain visibility over the entire process and as a result gain greater control over cash flow.

Advance is targeted primarily at smaller firms who tend to have more financing issues, although it is not restricted to that sector. The funding – provision of the cash to the suppliers who take up the offer - comes via the Virtaus “financing engine”, a joint venture between Basware and Arrowgrass Capital Partners LLP, a major London based hedge fund with billions of pounds (dollars, Euros) of funds under management.

Suppliers can ask for immediate payment on an invoice by invoice basis. The platform carries out an automated risk calculation, and then decides whether or not to offer immediate payment, and at what discount rate. That depends largely on the status of the supplier, although the rate may vary slightly depending on the buying organisation that the invoices relates to as well. “Once the supplier starts using the platform, and builds up a profile of behaviour, the funding cost to them is likely to come down”, explained Esa Tihilä, the Basware CEO, when we spoke to him last week.

But the key point is that this is not dependent on any agreement from the buyer or indeed even on the invoice being approved at the point of financing. That differentiates Advance from most SCF offerings. Basware (and Arrowgrass presumably) are taking the risk that the invoice may not be authorised or paid - presumably the supplier would then have to be chased to recover the money! But in the usual situation, when the buyer pays (after 30, 60 days or whever), that money flows back to Basware; so again, there is some risk there if the buyer does not pay to terms.

Having said that, whilst Basware (and / or Arrowgrass) are taking on more risk here than most technology providers do in SCF offerings, the advantages are clear to the supplier. The platform is apparently very intuitive and easy to use (we have not seen it yet), the buyer does not have to be involved at all, and there is an almost instant decision on an invoice by invoice basis as to whether finance is available. The only constraint is that the invoice has to be submitted via the Basware Network.

The uptake of some supply chain finance offerings has been somewhat disappointing to date, but that may be down to early adopter issues and the market not quite understanding them, or a lack of simplicity in the execution and delivery. If Advance really is as straightforward for suppliers to use as it sounds, it will be very interesting for many and could well be a very positive “advance” (see what we did there?) for Basware.

Basware have one pilot client using Advance in the UK, and today’s launch is largely focused on the UK, with general availability in early 2016. Germany, the Nordics and other European countries will follow, then a staged roll-out to other geographies over the next two years. However, Tihilä was cautious on detailed timings - “it is hard to be precise as legislation does differ country to country - we must make sure the service is applicable in each country”. And we’ll be back later this week with our full interview with him.

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