What is the difference between cash (liquidity) and cash flow?
In a broad sense, cash flow is the money going in and out of a company over a period of time, whereas liquidity refers to assets immediately available in cash. Companies often build up their liquidity reserves by maintaining positive cash flow over time, but the same can also be done on a smaller scale via cost cutting and supplier discounts.
What is working capital?
Working capital is a key performance indicator of an efficient supply chain. The formula for working capital is the the sum of current assets minus the sum of current liabilities. Assets consist of a company’s inventory, accounts receivable (A/R), securities, and bank balances. Liabilities include all money owed — accounts payable (A/P), notes payable, accruals, etc. For accountants and treasurers, the term “current” refers to liquefiable assets and liabilities (such as supplier invoices) due within one year. In most cases, a low level of positive working capital is considered optimal.
Why is supplier finance such an important issue right now?
The international financial crisis of 2008 was a turning point in the banking industry that led to a worldwide tightening of credit and lending markets. Corporations could no longer rely on banks for quick and easy loans on demand. An exceeding amount of pressure has been placed on corporate CFOs and treasurers to reduce their Days Sales Outstanding (DSO) and increase Days Payable Outstanding (DPO) across the board. Meanwhile, suppliers have been at even higher risk due to these same lending constraints, now with the added burden of lengthier payment terms. Supplier finance is a critical issue right now because it offers a pathway for corporations to increase their liquidity without jeopardizing the health of their supply chains.
Should I work directly with a bank to provide supplier financing?
Working with a single lender is a proven method to finance earlier supplier payments. However, the financial benefits to suppliers are limited by higher lending rates due to a lack of competition. Using a multi-bank solution results in more competitive lending rates that are only achievable in a free market environment.
What is SupplierPay?
The White House SupplierPay initiative aims to gain support among large corporations who are committed to giving their suppliers quick and affordable access to capital. The United States government views lengthy payment terms as a key barrier to small business growth and national productivity. Without quicker access to capital, suppliers cannot grow, hire, or make key purchases. There is no single mandated solution required in order to become SupplierPay compliant.
What is Supplier Diversity?
Supplier diversity is the cause of advancing business opportunities for certified minority business enterprises (MBEs). These include Asian, Black, Hispanic and Native American owned businesses. Many supplier diversity programs also feature a commitment to veteran, women, and LGBT owned businesses. The purpose of supplier diversity initiatives is to present business opportunities for groups that are historically underrepresented in the business world.