Several businesses have started leveraging benefits from supply chain finance to increase the working capital, reduce risks, and develop better supplier relationships. However, without knowing the supply chain meaning, you cannot manage your supply chain financing process.
The term- supply chain refers to the activities of organizations to provide services and goods to their consumers. However, suppliers always like to access affordable liquidity and find better visibility into their payments. Buyers try to simplify the payables process in the supply chain. But, it may not be easy for you to get the desirable results. That is why several firms have organized supply chain finance programs for their working capital needs.
Now, you can check out some strategies for better supply chain financing solutions-
Detect your SCF goals
One of the most important steps for every project is to understand the goals and anticipate the outcome. Using SCF, you will be able to create a buyer-focused strategy. It will provide better value to your company, and you may keep up a better relationship with suppliers.
For instance, you have thought of standardizing some terms to ensure better operational efficiencies. The major purpose is to push out your payables to make your working capital more efficient.
You may have also created a supplier-focused strategy to give access to liquidity and make transparent payments. It is better to combine both these approaches. You will find a proper balance of your working capital savings. Moreover, you can maintain a better relationship with suppliers.
Identify the affected party and socialize with them
It is always essential to be decisive to ensure proper communication in your internal team. With an effective SCF program, you can relate to your technology, account payment, and procurement. You can manage these things with different metrics and goals.
Avoid the Request For Proposal
One of the major steps taken by organizations to start a project is to deal with RFP. However, in the case of supply chain financing, RFP is not the right choice. SCF is a relationship-driven and credit-driven process. It is not easy to assess qualitative factors, like implementation potentials.
The RFP process with strict cost-focused guidelines may not be the right alternative to SCF. Your company may have the dangers of receiving undesirable responses from your vendors. You cannot establish a trusted relationship with them.
Provide better details
Supply chain finance can provide you with a strategic way of managing working capital. That is why you have to share your relevant details to structure the SCF program for your suppliers and vendors. These details include geographies, legal entities, funding sources, and currencies. But, for some financial institutions, it is challenging to fund different currencies.
You have to review the present markets of suppliers and the legal entities of the buying firm. Large corporate bodies have different buying entities at multiple locations. Thus, you must provide details in relation to your supplier relationships. Make sure that they include information about the purchasing consistency between suppliers and entities.
Understand the needs of your financing institutes
You must allow much time to your supply chain finance. Providers have to ensure proper structuring of the program to tailor it to your business needs. It may include compliance approval and credit. The overall time needed is not for your financial institutes’ inefficiencies. It is a complicated process reflecting regulatory rules and reliable business practices.
These are some tips on supply chain finance for your business. However, you must learn the supply chain meaning. You have to identify the SCF program goals. You have to be strategic in your approach to achieve success.
To fund your urgent working capital needs, you can also apply for alternative solutions like an unsecured business loan and secure high-value finance up to Rs.45 lakh.
Bajaj Finserv, one of the leading NBFCs offers collateral-free finance with minimal documents and quick approval. This NBFC also provides personalised loan deals on its products such as business loans, personal loans and home loans.