Financial Supply Chain Management

"What a tangled web we weave when first we practice to deceive" Walter Scott I am a fan of supply chain finance. Executed properly it can allow buyers to optimise their DPO without painful extensions to payment terms for suppliers and it can lower the cost of working capital to suppliers. But it doesn't always work like that. There isn't a simple definition that covers all interpretations of supply chain finance but at a high level it involves the collaboration of a strong buyer extending their superior financial strength to their buyers to allow them to borrow on the strength of approved invoices. That sounds very worthy doesn't it? But let's look at what can really happen. Let's listen in to the conversation between a buyer and supplier. The supplier is on 30 day terms and his his generous customer offers to allow him to borrow money for 30 days at a favourable rate.

Most software sales people are like ventriloquists. They demonstrate software that looks the part but is often pretty dumb. They make it look clever by presenting it professionally and filling in any gaps in actual functionality with promises and distractions. We've all seen it before - software solutions that run best on PowerPoint. But occasionally you get to see a solution that stands up by itself and delivers. It just works.

[caption id="attachment_6736" align="aligncenter" width="480"] Bertram Meyer - CEO Taulia[/caption]

The British can make strong claims to the invention of the computer (Babbage) and the World Wide Web (Tim Berners-Lee) but examine the DNA of the modern world of technology and it's mainly American with a strong Northern Californian flavor. Ariba, Oracle, Google, Twitter - Silicon Valley born and bred.

But it's not just Americans that are behind this innovation. This phenomenon has more to do with geography. Two of the most interesting innovators in the P2P space, Taulia and Tradeshift, although San Francisco based, are European - well their founders are. Why is it so important, indeed, is it important, for tech start-ups to have a Bay Area address? I was in San Francisco a few weeks ago and took the opportunity to speak to Christian Hjorth, Head of Sales at Tradeshift and Bertram Meyer, CEO of Taulia to understand why Silicon Valley is still important.

The cost of credit to many businesses is so high that it threatens their continued existence – that’s if they can get credit at all. And it’s not just a problem for them – it affects their customers and their suppliers. The full extent of the supply chains within their industry is affected. But it need not be like this. By taking a fresh view of risk, that cost of credit can be reduced significantly. We’ve taken a detailed look at OB10’s Express Payment offering to understand how this new way of trading can work in practice.

Last month David Cameron announced a valiant government sponsored initiative. The primary objective of the UK-backed program is to provide small businesses with much needed access to liquidity - put in simpler terms: to pay small businesses faster. If you're unfamiliar with the current global economic environment, large organizations are taking longer and longer to pay their suppliers. In many cases, suppliers are paid 90 (or even 120!) days after they provide goods and services to their customers. This has been the case for many years. If you’re wondering why, the answer is money.

Despite their apparent compelling appeal, some great ideas just never take off the way you might have expected: 3D cinema; internet refrigerators; the umbrella hat. It’s not just the frivolous inventions that don’t make it and in the business to business technology space there are as many examples. EDI is one. In some industries, such as retail, it’s well embedded as a core tool but is never really took off and the overlapping emergence of the internet in the 1990s saw growth in VAN based EDI plateau permanently. Purchasing cards is another technology that promised more than it delivered. The benefits are compelling. To consolidate all of you supplier invoices into a single electronic statement that can be uploaded into your accounting system should be the default way we do business – but it never worked, apart from in a few niche areas. And there’s a third – supply chain finance. The concept is far from new but despite years of marketing and product development, there are few examples of commercial organisations that have been able to prove its full potential. But that might just be about to change.

OB10’s new Express Payments model is going to change fundamentally the way some businesses operate. It’s not just because it offers a means of extracting greater value from business transactions – Express Payments is not actually unique in that respect. It’s because it is amongst the first enterprise applications that can truly claim cloud credentials.