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Digital trade documents and SCF

3 MIN READ
Feb 4, 2025

There is a lot of talk and energy going into the digitisation of trade. These are important initiatives. Buzzwords abound like "DNI", "MLETR", "ETDA" and "eBLs" - technically "buzz-acronyms" really - see more here.

As a corporate treasurer or CFO - do you care?

Well - you should. But probably, right now, you're not sure.

Stick with us - we will get to the point

Perhaps most corporate treasurers and CFOs have already stopped reading!

But if you are still here, thank you - we will get to the point quickly - 2 more minutes only to read here.

Digital trade documents and SCF

Why corporates don't care about digital trade (very much)

There's a couple of reasons why this topic is not at the top of the corporate in-tray:

This has all been going on too long.

Is there a real benefit from digital trade documents?

Yes.

The main benefit comes for corporates via working capital efficiency. It comes from using "digital documents" with SCF.

Many corporates would like to have longer payment terms with suppliers.

This improves working capital, often with a P&L benefit as well.

It is a win-win enabling suppliers to accept long payment terms whilst supply chain finance is mobilised to pay suppliers quickly.

Supply chain finance is simple to organise

Buyers approve invoices for payment as quickly as possible, financiers rely on that buyer approval and pay suppliers immediately, financiers get paid back later.

The finance is paid for by the supplier - and the new breed of SCF platforms (like PrimaTrade) can also create a P&L win for the buyer on top, get approvals done at shipment (instead of after delivery), and all with a high level of automation.

How can digital trade documents and SCF combine?

There are often laws or codes of practice that limit invoice terms.

For example:

These short payment terms make supply chain finance hard to organise. And we all know that there are companies where laws and codes are more relaxed that operate with 90, 120 or even longer payment terms with their suppliers.

The solution is the electronic bill of exchange.

But bills of exchange are ancient and painful to use, we hear you say.

Yes - on paper, but digital versions are now supported under English law (see ETDA 2023) and they are very simple and easy to use.

What is the benefit of the electronic bill of exchange?

The arrangement is simple if a "cash against data" approach is used:

  1. Supplier ships, and provides (a) data about what it has done and (b) a draft digital bill of exchange drawn on the buyer to settle the invoice instantly. This can be done in one step by the supplier.

  2. Buyers use the data provided to accept the digital bill of exchange; it is endorsed to a financier that discounts the bill and pays the supplier immediately. This happens digitally and automatically and the supplier is instantly paid.

  3. Later, the financier presents the digital bill of exchange to the corporate and the corporate pays. Later can be any reasonable period - 90, 120, 180 days - it can be longer than the original invoice.

There are some key points:

Does the electronic bill of exchange benefit the supplier?

Yes it does. Suppliers can be paid at shipment - meaning they are able to work with buyers without worrying about payment risk and credit risk.

As the goods leave, cash arrives.

How do I start?

Here is a fun post on how digital bills of exchange can work in practice.

Get in touch with us:

We can explain the mechanics and answer any questions about this new technology - and how it can be used to enhance existing SCF programs or set up new.

And it will be a win-win for you and for your suppliers.

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