Supply chain finance is broken
This week a well-known supply chain finance platform published their processing volumes for 2024 and claimed to be the only “complete working capital platform in the world”.
Click here to see one of their posts.
The data speaks for itself
Their statistics show:
US$500bn in invoices processed
US$40bn in funding for suppliers
US$3bn in funding for SME suppliers
But whilst these are big numbers, we can see that:
Only 8% of approved payables are being financed
And then only 8% of that finance reaches SME suppliers
The innovations that we are bringing to the market are important and address the poor performance of the existing platforms. This vendor is not alone - the utilisation and reach figures they show are typical across the industry.
Supply chain finance is broken.
What’s going on?
Their SCF platform is not delivering for customers.
Despite their claim, they don't have a “complete working capital platform” - something that we challenged them on directly.
Nobody today has a complete working capital solution.
But the important point is that the mainstream legacy platforms that we all know are missing key functionality that would transform the performance that they deliver for their clients.
Why process so much but deliver so little?
The purpose of a supply chain finance platform is to get early payments to suppliers.
But only 8% of the invoices they process deliver this.
It’s a data problem.
The platform’s only source of data is the buyer’s accounting system.
The buyer’s accounting system is usually updated after goods delivery.
So that means:
the early payment offer is not very early
most suppliers say no to the offer because it’s not worth the hassle
And why are SME suppliers not well-supported?
Financiers only pay the supplier after the buyer has approved the invoice.
The platform provides no help to the buyer with approving invoices quickly – there’s no automation for this step from the platform.
The buyer’s finance team is doing all the work and usually it’s manual.
Most buyers therefore decide only to support their most important suppliers. So smaller suppliers (who really need the early payments) are excluded.
What’s missing from the platform?
The new breed of supply chain finance platform works differently.
The flow of data and the process is from the supplier, not the buyer ERP.
Suppliers hand over product and then:
Provide their documents
The platform automatically extracts structured data from the documents
This enables automated and instant invoice approvals
And so:
Early payments become truly early (before delivery)
All suppliers can be included because its automated
Why is supply chain finance broken?
We have an industry which is processing impressive volumes but actually not delivering commensurate value.
Utilisation rates are low and the reach of platforms to the suppliers who really need support is not there.
And it does not help when platform vendors themselves do not recognise the weaknesses in their own products.
The data speaks for itself.
Talk to us – we can sort this out for you.