Why corporates use PrimaTrade
PrimaTrade’s platform connects buyers, suppliers and financiers in order to digitize supply chain activity and convert paperwork into actionable, structured data. Suppliers do the work, self-digitizing their transport, packing, inspection, compliance and commercial documents each time they ship.
It is much more efficient for suppliers to provide structured data to their buyer customers when they ship, rather than paperwork. See here for more information about why digitizing trade is important.
Main benefits for corporates
As we found in our recent discussions with over 100+ corporate treasurers at the recent Eurofinance treasury conference, there are pain points in corporate treasury and across their organisation which treasurers, and their colleagues in finance and procurement, would like to address.
See more: here.
The key points mentioned to us were:
Supplier financing (“SCF”) programs that are under-delivering.
Control over payment terms with suppliers sits outside treasury, which makes working capital hard to manage; working capital targets are commonly becoming senior management KPIs.
Poor visibility over supply chain transactions, especially at the enterprise level; this makes forecasting and management of payables hard to achieve efficiently.
Unsurprisingly, when we look at our current clients, these pain points loom largely in the reasons that they give us for why corporates use PrimaTrade.
We have a separate post coming shortly on how PrimaTrade's platform can be used by corporate treasurers to make existing supply chain finance programs work better for them (point 1 above).
In the meantime, here are some of the other reasons why current clients are using our platform:
Example client #1: retailer
Our client is a retailer purchasing stock for re-sale with a presence in multiple countries, a mult-billion US$ turnover and approaching 1000 suppliers in many countries, particularly in South and East Asia. They have more than 10 purchasing teams, even more brands, many legal entities, and four finance teams.
Suppliers were consistently asking for shorter payment terms because of their own working capital pressures and the requirements of local exchange controls.
But, on the other hand, our client wanted to extend payment terms without sacrificing intake margins in the process – centralising and taking control over the cash management of the supply chain.
Moreover, with multiple teams, entities and geographies, our client wanted visibility and up-to-date, even real-time, data for hedging and forecasting.
When treasury previously looked at implementing an SCF program, they ran into resistance from the colleagues in procurement, who saw little benefit in having difficult conversations with suppliers.
PrimaTrade delivers on all these objectives – with all the suppliers now on the platform and self-digitizing their paperwork – our client has booked over $5m in cost savings (fully supported by procurement), generated $40m in working capital, reduced headcount workload in payables processing teams by 40%.
They also gained a real-time enterprise-level view of their payables positions and working capital KPIs (see an example dashboard here).
Example client #2: wholesaler
Our client is a wholesaler purchasing goods for immediate re-sale with a presence in multiple countries, a multi-billion US$ turnover and a complex international structure.
With low net margins (1% or lower) on revenues, they already run a very efficient model with stock often being purchased, immediately re-sold to a client and then delivered directly from a supplier to that client.
Their primary goal in using PrimaTrade is to speed up payable approvals to be able to offer an instant payment option to suppliers as a service, creating a competitive advantage for themselves and enhancing their margins, with a secondary goal to improve information flow and processing.
Suppliers typically borrow more expensively than our client does, and are very sensitive to payment terms. Suppliers are also often taking expensive finance from the market that can be replaced by an early payment giving both the supplier and our client a win.
Moreover, the client’s existing borrowing base facilities can be used to fund early payments to suppliers so there is no need to locate a new funder or execute new funding paperwork.
This implementation is all about operating an efficient early payment system for suppliers backed up by concrete legal paperwork executed shipment-by-shipment against digitized trade and commercial documents and using existing funding lines. The paperwork is especially important to ensure the borrowing base facility can be used.
Suppliers win via the option of instant payments coming at a lower cost than their marginal funding rates, whilst the client gains a margin enhancement that is material via the discounts that suppliers agree for instant payment.
Example client #3: manufacturer
Our client is a European mid-sized industrial business operating in multiple geographies importing components and raw materials, manufacturing equipment, which is then sold both B2B and B2C. The supply chain stretches into Asia and is a mix of local and distant suppliers.
Having recently completed a management buy-out, our client is leveraged but has strong cash flow and EBITDA dynamics. Shareholders are interested in both margin benefits and working capital wins that can come out of arranging supplier financing – and this needs to be done carefully given the balance sheet position of the business.
Existing bankers are content with their position but without appetite to extend their lines – which means additional working capital facilities need to come from trade finance funds and non-bank sources.
Unlike the banks, these funders have no capacity or desire to work directly with suppliers themselves, so a platform is required that can efficiently distribute funds out to the suppliers without exposing the funder to operational or compliance complexities.
Prima here is the ideal solution because the client is mid-market and wants to avoid a complex implementation and high upfront IT expenses. They also want a solution that will work for all their clients operated by a platform-provider (PrimaTrade) that can handle the whole supply chain so that they can access funding from "trade funds" that have limited back office capabilities.
Since our platform is driven by supplier data, it can go live without an IT project – and with high levels of automation, PrimaTrade can scale the supplier financing program, across the whole supplier base, supporting multiple funders concurrently and under client control.
Every client is different!
Every client has its own particular needs, current pain points and goals to deliver.
As PrimaTrade’s technology continues to evolve and more clients come on board, the simple premise at the heart of our platform reveals its power.
Quite simply, digitization of trade drives huge benefits.
And, it is not hard to do. We get suppliers to provide structured data using PrimaTrade’s self-digitization approach and this means that programs are quick to implement and are flexible in how they work.
Get in touch with us now to find out more.
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