Supply Chain Finance Definition
Supply chain finance (sometimes referred to by the more obscure term ‘financial supply chain management) is all about optimizing the flow of money in and out of a business across it supply chain or to it’s customers.
The time it takes to pay a supplier and the terms on which payments are made (e.g. a discount for early settlement) can have a significant impact on the cash position of both the buyer and supplier. It is important therefore to ensure that the details of these transactions are optimized.
There is no strict definition of supply chain finance but, broadly speaking, it refers to tools techniques and products that help businesses optimize their cash flow by managing payments to suppliers and receipts from customers. These techniques can be as simple as extending payment terms to suppliers or demanding cash on delivery from a customer. More sophisticated examples if supply chain finance techniques include dynamic discounting and reverse factoring.