Achieving Greater Visibility Into Payments

One of the many lessons learned in 2020 was that there is a critical need for greater visibility across many facets of the supply chain. Companies are now viewing supply chain visibility beyond of the lens of logistics and inventory, and now understand how improved visibility into supply chain cash flow can give them an edge moving forward.

Many industries faced unprecedented and unpredictable cash flow interruption in 2020, as buyers and suppliers were forced to adapt to changing customer demand and new pandemic requirements. What happened in the supply chain was a microcosm of what happened all over the globe: disruption, uncertainty, and lockdown.

It also exposed weaknesses in the current state of supply chain visibility. While it’s possible to pinpoint with laser accuracy a shipment moving across the supply chain, or available inventory of a given component, many companies still lack visibility into payment accuracy and timeliness. In a time of crisis, this can have a paralytic impact on financial forecasting when clarity is needed the most.

To make agile business decisions amid this uncertainty, companies need accurate and easily accessible visibility into payments. Technology-enabled working capital solutions such as supply chain finance help companies take control of cash flow, both from an increased visibility standpoint and an early-payment perspective.

Cash flow visibility offers insight into whether invoices have been approved and submitted for payment, thus providing transparency in the payment cycle. Suppliers can track when an invoice was submitted, received, approved, and scheduled for payment. This allows suppliers to have real-time insight into cash flow operations, so they can make more informed business and financial decisions. For this reason, it’s important to note that suppliers’ appetite for certainty and accuracy of payment has grown, and will continue to do so, just as it has for expedited payment.

Not only does increased visibility offer insight into invoice approvals, it also provides transparency into any errors that need to be reconciled. In the current and projected short-term future state of the global economy, most suppliers can’t afford to wait a payment cycle or more to discover payment discrepancies. Instead of being reconciled after the fact, errors in amount paid can be identified and rectified early in the process.

It’s especially important for suppliers to have insight into payments and quick access to capital to navigate volatility or respond to shifts in their customers’ business strategies. With a technology-enabled supply chain finance solution, suppliers know exactly which invoices are eligible for early payment as soon as they’re approved by their customer, as well as the exact payment amount. Suppliers can also advance payment on invoices exactly when they want, and as much or as little as needed, based on current business requirements.

Improved payment visibility empowers companies to take control of cash flow and acquire the tools they need to face disruption head on, thus enabling them to plan their investments and business initiatives now and in the future.

Outlook

In some ways, this year might prove to be even more challenging than the last for companies to navigate financially. The recessionary business climate will likely continue well into 2021, which will further strain cash flow up and down the supply chain. Giving suppliers access to early payment and visibility into payment certainty will allow them to navigate these challenges with greater precision.

Posted with permission from SupplyChainBrain.