Supporting corporate treasurers in their evolving roles

Johannes Wehrmann at Demica explains how supply chain finance can be a key tool in a corporate treasurer’s arsenal

The corporate treasurer’s function has evolved from a traditionally operational role to one of strategic importance. No longer are they purely focused on handling cash management and risk mitigation.

For organisations today, treasurers maintain financial robustness, propel growth strategies and preserve the fiscal health of their business. However, expanded responsibility also means new challenges, as treasurers look to balance both global and enterprise-specific concerns.

Business leaders must now appreciate that treasurers are confronting the challenges of an integrated global market. A geopolitical shift or economic pivot in one corner of the world can send waves across the entire business ecosystem.

This interconnectedness, coupled with the unpredictable swings in today’s markets, introduces new complexities into financial forecasting. Delving deeper, on the operational front, treasurers are managing critical tasks, from maintaining fluid cash flows and navigating the labyrinth of regulatory demands to managing the perception and reputation of businesses.

Many are also dealing with tightening liquidity, amplified by rising interest rates, inflationary pressures and supply chain hiccups. Given this dynamic backdrop, it’s essential that treasurers have access to the latest financial tools.

Supply chain finance is gaining traction as a powerful tool which corporate treasurers can use to fine-tune liquidity management. But despite its clear benefits, some businesses remain hesitant, perhaps due to misunderstandings or misconceptions. How can leaders understand the opportunities and take advantage of this suite of solutions?

The advantages of supply chain finance

Supply chain finance is the collective name for a number of open-account trade finance products, such as payables and receivables financing, buyer-led dynamic discounting and structured receivables financing.

Payables finance allows treasurers to enhance cash flows by adjusting payment terms, leading to improved balance sheet metrics. Not only does this help maintain financial stability, but it also strengthens their relationships with suppliers by offering them early and reliable access to payments. Meanwhile, off-balance sheet financing means treasurers can continue to categorise the liability as trade payables (rather than debt), pending validation from auditors.

A recent addition to the supply chain finance toolkit, dynamic discounting, enables suppliers to be paid early at a variable discount. Offering early payments through this method can support treasurers in boosting their P&L, especially during economically challenging times.

Further benefits can also be seen from receivables discounting. By selling their invoices to a funder, suppliers can significantly reduce their days sales outstanding (DSO). This results in enhanced cash liquidity and a refined balance sheet. With Trade Receivables Securitisation, a different method to manage working capital, treasurers can convert accounts receivable into marketable securities, enabling access to a wider pool of investors.

With growth an imperative for leaders, this innovative financial strategy offers a scalable tool that can grow with the needs of the business. Treasurers can access this capital to support expansion efforts or weather economic challenges more robustly.

Making use of the right technology

The next aspect that business leaders need to consider is how corporate treasurers can access supply chain finance solutions. Cloud-based platforms are one such way. By using these platforms, treasurers and their teams can streamline, automate, and expand their working capital initiatives. These user-friendly online interfaces make transaction collaboration seamless and provide intuitive setup for both payables and receivables programmes.

To help connect sellers, buyers, and banks directly to these platforms, tools for onboarding are essential. Detailed analytics give treasurers immediate insights into the performance of receivables. Platforms also offer direct connectivity between corporate ERPs and core banking systems, reducing manual processes and improving efficiency. This becomes particularly crucial when dealing with cross-border activities, varied jurisdictions, or engaging with entities of differing credit standings.

For treasurers and their businesses, finding the right partners to support their supply chain finance programmes is key. These partners provide not only specialised knowledge but also the technical tools to ensure programme success.

Clearing the path forward

In today’s intricate financial ecosystem, supply chain finance should be seen as a powerful tool that corporate treasurers can utilise. This method not only provides a streamlined approach to managing liquidity, but can also serve as a more economical alternative to traditional borrowing. However, the nuances of the supply chain finance market can be daunting, which might deter some businesses.

To access the benefits of supply chain finance, leaders must consider partnering with platforms that help simplify the implementation and running of these working capital strategies.

By adopting cloud-based technologies and creating direction connections between buyers, sellers and financial institutions, programmes can be set up and run easily and treasurers gain immediate insights to support financial planning. 

By integrating modern technologies and developing partnerships, business leaders can enable corporate treasurers to use supply chain finance to address present-day financial hurdles, fine-tune liquidity management and guide their businesses to fiscal prosperity.

Johannes Wehrmann is Managing Director at Demica

Main image courtesy of iStockPhoto.com