Warren Buffet and Supply Chain Finance

As disciples of Warren Buffet well know, the intrinsic value of a corporation is based on its ability to drive operating cash flow in a predictable fashion.

One of the unsung benefits of supply chain finance for suppliers is the ability to drive more predictable operating cash flow. Often we see investment grade suppliers with plenty of cash trade their receivables for early payment on our SCF platform.

Why?

They don’t need any more cash in the bank. They can also borrow more cheaply from other sources.

One of the primary reasons is because these suppliers have operating cash flow forecasts to meet and when something unexpected happens (eg some customers don’t pay as expected, sales miss the mark) they tap into supply chain finance liquidity. Getting paid early on receivables through supply chain finance contributes to operating cash flow, not debt (financing cash flow).

SCF offers treasurers a great weapon to help consistently meet the organization’s cash flow expectations.