Just in time finance – how to deal with the need for short term finance

Just in time finance – how to deal with the need for short term finance

Posted by Pete Loughlin in Financial Supply Chain Management, Supply Chain Finance, Working Capital Management 22 Oct 2013

A couple of weeks ago, I sat down with Tony Duggan, CEO of Crossflow Payments, an organisation looking at alternative ways to bring together suppliers and corporate buyers and strengthen supply chains.

Supply Chain Finance is a bit of a buzzword at the moment. The old guard, the banks who seem to have tunnel vision for the very big trade finance deals, and the factors who exploit to a greater or lesser extent the vulnerabilities of small and medium sized businesses view the new SCF players with a mixture of  doubt, suspicion and (although they’d not admit it) – fear. And they’re right to. Some of the new models emerging are innovative and impressive and they promise to take business away from the traditionalists. Crossflow is going to do just that in my view. Inspired by hands on experience in industry, Crossflow Payments has taken the concept of ‘Just In Time’ manufacturing and applied it to the financial supply chain. Tony believes that this can help transform the way financial supply chains operate.

Purchasing Insight logo“Longer payment terms are now becoming a reality that most suppliers have to face.” Tony explained to me. “In the course of last quarter alone, we have seen examples of large retailers and consumer goods manufacturers extending their supplier payment terms to the 75 to 100 days range to facilitate their growth strategies. This affects businesses and trade cycles and it is forcing their suppliers to re-evaluate their own strategies in order for their businesses to remain viable and profitable.  And at this stage the problem of short term financing comes into play. How can you support a business, drive growth and remain competitive when your receivables are pushed back in the next month or even quarter? And how can you maintain a positive cash flow? “

This is exactly what the banks are supposed to do – indeed they claim they do this but their reputation amongst consumers and small business isn’t great.

“Moreover” he explains, “a recent survey revealed that awareness on government lending programmes and alternative sources of finance is really low, particularly among SMEs.  From my experience as Supply Chain Development Director at Wickes, I have seen corporate buyers implementing systems to support just in time operations in the supply chain with significant benefits in streamlining processes and reducing costs. Our vision is that this is exactly how supply chain finance should work.

“Crossflow Payments is positing the model of ‘just in time finance’, aligning the flow of finance to suppliers when it is actually needed to support operations and fuel growth. We aim to bridge the gap between longer payment days and lack of affordable funding and help buyers and suppliers maintain a healthy relationship while actually improving cash flows for both parties.

“In a nutshell, our technology fully automates the transaction flow from invoice processing, approval, payment and settlement to the finance provider, enabling the introduction of just in time finance. This is the first solution in the market that integrates transaction processing with supply chain finance and we are really proud of being able to offer so much more than a traditional EDI platform, by providing our solution free of charge for the corporate buyer and supplier using our cloud based service.

“After 3 years of R&D efforts and building on the experience of processing over 20 million invoices to date we are now in the position to provide an alternative supply chain finance proposition to the market. Our aim is to be able to help all parties that use our platform implement their business strategies and sustain growth for their businesses. It is a win-win situation for our buyers and suppliers alike and definitely something to take advantage of in a time of uncertainty. “

Pete Loughlin can be found on twitter @peteloughlin

  • William Laraque October 23, 2013 at 2:35 pm /

    Nicely done! Your equation is missing a key component, namely the involvement of export credit agencies as guarantors and as providers of credit insurance. Your functionality is exposed as well to requirements of export controls. Homage needs to be paid to the fact that we live in a geopolitically risky world and as much as we would like to think that SCF to SMEs can be achieved without banks and the mitigation of political and commercial risk, it can, but not for long.
    The South-South and intra-regional trade flows, the fastest growing components of international trade, provide a critical element to risk mitigation and the need to provide guarantees to bank.
    I agree that it is hard to educate the financial community, to teach old dogs new tricks, but I am living proof that old dogs not only bark but occasionally bite as well.
    Your solutions may be “just in time” but they must also endure the test of time.

  • john mardle October 29, 2013 at 1:42 pm /

    This opportunity is certainly practical in the UK SME marketplace. Whether it has the sustainability and the USP to defeat the likes of PayPal, Amazon who are now entering this space both in the US and in the UK remains to be seen.

    Europe remains a distinct area where few will tread as it is to complex.

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