By Andrew Farnhill, Business Development Advisor at LiquidX, based in London
In today’s economic environment, companies of all sizes are feeling pressure from inflation in its different forms – particularly when it comes to energy prices and the rising cost of finance. Even mid- to large-size companies have spoken of experiencing drags on performance due to inflating prices and the effect of base rates on financing.
In Europe, world events are having a direct impact on how these trends are manifesting. High gas prices and energy infrastructure risks have brought about talks of rationing. Credit insurers are experiencing reduced risk appetite reflecting concern for nonpayment or delays. Continued instability and availability issues related to goods, services, operational constraints and employee retention are inflating business costs. Increasing base rates have also jointly raised the perceived risks of investments, as well as directly contributing to increasing interest rates.
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There has been plenty of reporting on how to lessen these pains and challenges for suppliers amongst working capital solutions:
- Supply chain financing and receivables finance
- Opening up new liquidity channels
- Strengthening relationships between buyers and suppliers
- Operational efficiencies in the supply chain
These are effective tools to help businesses adapt to inflation and rising costs. Providing solutions with ancillary benefits to all market participants infuses greater stability and health into the supply chain during economic volatility.
How To Remain Competitive & Push Ahead in a Challenging Market
Many businesses today are looking for ways to not only remain competitive, but to simply stay in the game. Hesitation and skepticism from risk-adverse credit insurers have made financing expensive and complicated. But to stand against the ever-rising cost of goods, and maintain on-time payments to suppliers, corporates are in need of creative solutions to maintain positive cash flows.
Supply chain finance (SCF) remains one of the more cost-efficient sources of liquidity available. SCF programs allow buyers to pay their invoices at a later date while still providing suppliers faster access to cash. Funders purchase the buyer’s invoice, generally at a rate below that of loans or general facilities, paying the supplier before the invoice’s due date. At maturity, the buyer pays the invoice in full to the funder.
LiquidX’s user-friendly technology puts control of the supply chain solution in the hands of the corporate customer, bringing multiple funders on equal footing. LiquidX’s expertise in integrating with ERPs capitalizes on interoperability for a seamless experience. With access to better technology from LiquidX, corporates can manage their funding partners and banks with ease and cost effectiveness, to maximise the working capital benefit across geographies and diverse supplier networks.
Another effective method is by accelerating receivables, partnering with selected financial institutions for immediate liquidity. This option not only accelerates cash flow, but improves reserves, ready to handle excess or large & episodic cash flow demands – providing business resilience.
Receivables sale, or factoring, is highly conditional on debtor assessment, risk evaluations and payment period to establish viability. Each business and segment tends to have different features and contracts per customer. As a result, AR financing is typically more complex and uniquely structured, with finance teams evaluating based on unique funding opportunities and credit appetite for the receivables book. Guidance is required from experts, like those at LiquidX, partnering with a range of funders with a diverse set of funding preferences – many of whom are already working with LiquidX.
When properly structured, accelerating receivables not only bolsters the seller’s own cash position, but may also remove sales/credit capacity in their sales ledger, allowing the seller to offer appropriate terms or facilitate further sales – creating a positive commercial impact for them and their customers.
Digitising the Trade Lifecycle with LiquidX
LiquidX fintech solutions, led by our pioneering InBlock technology platform, digitize and automate trade assets across their entire life cycle. LiquidX provides banks and corporates with the flexibility to transact across multiple financial structures directly or within a multi-bank network, all on a single platform that is fully integrated with insurance, risk management, and internal finance systems.
InBlock has given our customers the ability to connect all of their data, scattered across different places, into one more platform where they can see their past, present and forecast future cash flow.
De-risking Your Business with LiquidX
Approaching financing alternatives, whether it be accounts receivable or accounts payable, can be complex. Having access to resources and technology that can seamlessly connect buyers, suppliers, and financial institutions is a huge advantage. LiquidX’s trade finance platform provides this exact solution. We can support customers by de-risking and helping manage efficient pools of fundable receivables and bringing scalability to payables opportunities. Our platform provides innovative workflow tools to support clients looking to strengthen supplier and customer relationships.
LiquidX offers end-to-end digitisation using the latest and greatest tech available today. To witness firsthand, request a demo or contact us directly to learn more.