The Treasurer’s Guide to Trade Finance

A Reference Guide to Trade Finance Techniques

What corporate treasurers
can do now

One of the biggest challenges for a
corporate treasurer is to decide whether,
and how, to approach a realignment of the
purchase-to-pay cycle. There is certainly
a compelling efficiency argument for
combining supply chain finance, P-cards
and e-invoicing. In the current environment,
some treasurers may also take the view
that they have a social responsibility to use
supply chain finance to free up cash for
their suppliers.
Corporate treasurers will, though, have
a number of concerns before committing to
realignment. For example, treasurers will be
concerned over the degree to which they
may become embedded with a bank. Large
corporations may be able to establish supply
chain finance programmes with more than
one bank; this option may not be practical
for mid-market companies. Treasurers will
also be concerned about the long-term
commitment of selected banks to providing
supply chain finance, and whether funding
levels will grow to continue to match an
expanding supply chain.
A lack of clarity over the future
development of e-invoicing solutions will also
prevent treasurers committing to a particular
solution. They will not want to invest time and
resource to building a supply chain finance

structure, only to see the software supplier

withdraw from the market. The issue of

connecting the various strands of a supply

chain solution is a crucial part of ensuring a

process which improves efficiency throughout

the supply chain. Even if these questions are

resolved satisfactorily, a treasurer cannot act

alone to realign the purchase-to-pay cycle.

MH: As a strategic project, the company will

need to ensure key performance indicators

are aligned across the company, so that

departments are assessed on a similar basis;

different departments cannot have conflicting

objectives. To achieve this, a project will

need to have CEO and board-level support,

to get the active involvement of all relevant

departments needed for success.

Conclusion

This discussion has shown how the three

non-competitive techniques of supply chain

financing, e-invoicing and the use of P-cards

can be combined to improve efficiencies in

the supply chain. It has also indicated that

these techniques are not yet sufficiently

developed to offer a solution which can

incorporate the whole supply chain.

It is likely that no single, best solution will

emerge. The challenge over coming years

is to develop solutions which give suppliers

choice over which financing solution to adopt.