A Supplier’s Perspective: Saying Goodbye to the Black Hole of Payment Processing

For suppliers, the most obvious benefit of supply chain finance is accelerated cash flow. Getting paid faster is a pretty powerful thing – especially in today’s business climate. But the cash flow improvements provided by supply chain finance aren’t just about speed. It turns out that visibility into the payment process can be just as beneficial for suppliers. Here’s why.

Historically, suppliers have encountered a scenario we like to call the “black hole of payment processing.” You send an invoice to one of your largest customers and…well, things go dark. Did the customer receive the invoice? Did they input it into their financial system correctly? Was it approved for payment? If so, was the correct amount approved? Was payment sent?

With PrimeRevenue’s supply chain finance platform, these questions are answered immediately. Buyers upload an invoice directly onto the platform and suppliers are notified when the invoice is approved. Any discrepancies in the invoice, including the amount due, can be addressed right away by the supplier.

Suppliers have visibility into the payment amount whether they decide to trade the invoice on the buyer’s supply chain finance program using the participating funder or wait until the maturity date for the payment to come through.

ALRO Group, a Belgium-based automotive supplier to OEMs like Audi, Mercedes and BMW, is one supplier that has greatly benefitted from this kind of visibility. In addition to experiencing cash flow challenges caused by a tough economic climate, the company struggled to track the status of invoices once they were sent to customers. ALRO had no way of knowing if there were issues until an invoice was overdue.

PrimeRevenue was an unexpected solution to the problem. Since joining a customer’s PrimeRevenue supply chain finance program five years ago, the company has traded over $110 million in invoices with an average of $54,000 per invoice. On top of getting paid 104 days early, on average, the company is able to track invoices online and remedy any issues or discrepancies before there is an impact on cash flow.

“Prior to using PrimeRevenue, it would take us two to three months to find out whether an invoice had a problem,” said ALRO’s Controller Bert Bammons. “Now, approved invoices are available on the PrimeRevenue platform within two to three days from the invoice date. We are able to follow up on missing invoices and take corrective action much faster.”

Electrical Components International, a supplier to some of the world’s largest home appliance manufacturers, echoes this sentiment.

“If you have 30 day terms with someone, and you get to the 40th day, you start asking why they haven’t paid their invoices. With supply chain finance, you know much earlier in the cycle if they are going to pay the invoice on time or not,” said Mitch Leonard, the company’s CFO. “We are also able to clear up any discrepancies much earlier in the order to cash cycle.”

The benefits of having visibility into payment processing are bountiful – from better forecasting and planning to risk avoidance. Just ask any supplier that has chased down a late payment only to hear that the invoice was never received. It can be the difference between being paid in 60 days or six months. For some suppliers, it can also be the difference between having the capital to move forward with a strategic initiative (e.g. equipment upgrades) or hitting the pause button. Fortunately, PrimeRevenue’s supply chain finance platform removes this blind spot.

Read ALRO’s case study.