Santa's digital trade finance
Santa has a major headache.
He's sourcing for 364 days a year and selling everything on one day. That's a lot of seasonality to manage and a significant working capital challenge.
Digital "Jingle Bills" - the easy way for Santa to manage supplier payments
Supply chain finance - oiling Santa's wheels
Without an MBA or a business degree, Santa's approach to finance has been largely elf-taught.
At least his bankers (at Snow Bank) are willing to provide plenty of support.
At Snow Bank, they are big fans of the new digital payment instruments - like electronic bills of exchange, now enabled under English law - although the gnomes at the bank call them "Jingle Bills", of course.
Jingle bills - Santa's digital trade finance
Santa has a very elfy supply chain. He wants to keep it that way.
So Santa doesn't ask his suppliers for long credit terms. They might give him the cold shoulder, and he doesn't want to be known as Saint Nickel-less.
So, with the help of his bankers, he decides to take advantage of the new flexibilities offered by electronic trade documents:
As each supplier hands over toys during the year, and they issue a digital Jingle Bill drawn on Santa alongside their invoice.
Jingle Bills always mature for payment on December 25th. It doesn't matter when the supplier ships or what due date might be on the supplier's invoice.
Santa accepts each Jingle Bill by signing it. On the supplier's instruction, the bill is discounted with Snow Bank and the supplier is paid immediately.
And Snow Bank is happy to wait until December 25th each year for Santa to honour his Jingle Bills and settle up.
Santa's accounts are in order because all those Jingle Bills are still current accounts payable.
His operating cash flow looks elfy - all thanks to those clever gnomes at Snow Bank.
The magic of digital trade finance
Using the new generation of supplier finance platforms, all this gets automated and managed simply by clicking a few buttons.
For Santa, this leaves more time for snoozing, snowball fights with the elfs and making sure the snow bots that run his warehouses don't meltdown.
At least Santa doesn't have to handle returns. And thank goodness for digital trade finance - smoothing Santa's cash flow whilst keeping his suppliers resilient and happy.
See here for a note in German from PwC on accounting for digital bills of exchange, like Jingle Bills - we have an English version, contact us below for a copy if you need one.
And here is our own note on "invoice payment extensions" which explains how to use digital bills of exchange, like Santa, to achieve much longer payment terms than suppliers might offer for their invoices.
Best wishes for the season to everyone!
Kris and Tim at PrimaTrade.