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Shifting the SCF infrastructure to meet SME needs

Enterprise By Duncan Khoury – 21 December 2016

The official purpose of the current supply chain finance structure is to help small and medium businesses access working capital finance to trade around the world. But, in reality, the current structures have only been designed for facilitating balance sheet management for very large multinational buyers, ultimately helping these large players turn financial debts into accounts payables, and leaving the smaller players behind.

To make matters worse for smaller businesses, the current supply chain finance framework has heavy, and costly, compliance and operational requirements. As a result, small and medium businesses struggle to access the working capital they need, and miss out on enjoying better purchase pricing from their suppliers.

To access finance in the first place, businesses need to meet supply chain finance requirements such as documentation and communication with suppliers. Capturing the entire flow of communication between supplier and buyer enables financiers to authorise payments and finalise the transactions – quickly and safely.

Currently, the closest eco-system that allows businesses to enjoy such benefits is the Octet platform. The platform enables businesses of all sizes to communicate transactional documents and access working capital finance, in real time, as well as allowing for the use of corporate cards to pay suppliers around the world.

In addition to making transactions efficient, using a supply chain finance management platform can help them build a track record to allow for access to higher working capital as the business grows.

The time has come to shift the supply chain finance framework to allow for businesses to benefit. But we can’t expect a rehaul to happen overnight.

While we wait for the current framework to restructure, businesses should seek to easily manage their finance sources, such as current accounts, direct debits or credit facilities, in one place. By doing this, They can efficiently and safely deal with domestic or cross border transactions, as well as build their track record with credit facilities.