BCR Publishing
We are the leading provider of news, market intelligence, events and training for the global receivables finance industry.
Working with industry leading organisations, experts, governments and universities, BCR Publications delivers expertise in factoring, receivables and supply chain finance to a global audience.
BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.
Liquidity Benefits From Dynamic Discounting in Supply Chain Financing
10-05-2021 | treasuryXL | Kyriba |
It might not always be obvious where business can learn lessons from somewhere like yacht racing, particularly in more specialist fields like Supply Chain Finance and Dynamic Discounting. But there are often uncanny parallels from this sport and finance, when both seek to deploy serious sums of money and leading-edge technology to deliver the marginal gains that can mean the difference between winning and losing.
I thought this was particularly evident in the recent America’s Cup yacht racing challenges in New Zealand. Those AC75 mono-hull super yachts that raced around the bays off Auckland often travelled at a logic-defying 40-50 knots, twice as fast as the winds that powered them and seemingly in defiance of both gravity and conventional sailing speed barriers.
Liquidity Made Good
The key to having one AC75 go faster than an almost identical competitor is the ability to analyse masses of data points in real-time to make the required adjustments to sails, rudders, weights and foils in order to attack the optimum route to the finish at maximum speed. It’s a concept called Velocity Made Good, with VMG now the go-to acronym that defines winners in America’s Cup racing. Perfecting VMG was the reason the New Zealand boat successfully beat its global challengers – again.
I was particularly struck by how this VMG-led transformation of yacht racing, now cascading down from the pinnacle of the sport to the club level, is not dissimilar to how a focus on technology-led cash and liquidity management is liberating corporate balance sheets. We could even refer to it as Liquidity Made Good, where, by the way, velocity also matters.
New Level Playing Field
The deployment of more powerful technologies can improve decision-making, release resources from previously opaque silos and supply chains, and deliver new competitive advantage. Historically this was only available to those high-tech firms and financial institutions with deep pockets, just like the owners of America’s Cup yachts, because of the almost prohibitive cost of computing power, data storage and analytics.
But cloud-based software platforms, the blossoming of data analytics, ubiquitous access to near-unlimited data storage and the power of connectivity-as-a-service now ensures, like in yachting, that these benefits filter down from the elite to level the playing field.
Greater Flexibility, Visibility
In particular, the once sleepy backwaters of trade finance are now waking up to new opportunities to maximise cash resources in ways that not only strengthen supplier relationships, but also enhance Corporate Social Responsibility credentials. Early Payment Discounting has been around trade finance for many years. But persistent, ultra-low interest rates and expectations of greater flexibility now demand more creative solutions from Treasurers. Answers to which technology can now help to provide.
Dynamic Discounting
Within the broader field of Supply Chain Finance, firms can now use technology to transform early payment schemes into Dynamic Discounting. These can be deployed as an integral part of wider working capital management, where better visibility can optimise liquidity and improve profitability. It might seem just a simple method of paying invoices earlier, particularly for businesses with surplus cash that can benefit both parties involved. But how it is managed becomes critical to the outcome.
Win-Win Solution
For Dynamic Discounting to succeed, it needs to be sufficiently flexible (dynamic) as to how and when suppliers are paid, with payments made prior to due dates at a discount to original invoice values calculated on a sliding scale. This means that the earlier the buyer pays a supplier, the greater the discount. The discount is therefore “dynamic” in relation to the number of days until the invoice due date and avoids the previous “cliff edge” difference between simply either having a discount or not.
Most importantly, suppliers get continuously paid earlier, which improves their liquidity position and which could then allow them to pay their own suppliers earlier, invest more in their business or alternatively just do more business with the buyer.
Funding Flexibility
For a cash-rich buyer operating in a low interest environment, the benefit is obvious. Rather than leaving liquidity in a low-interest account, it can pay large invoices early to receive additional discounts and strengthen profitability. For instance, if a buyer receives a 2% discount for paying a 90-day-net invoice after 30 days, it can invest the amount for 60 days and receive a return. This is the equivalent of a just over 10% annual return on capital that would far outweigh any loss of interest.
The buyer is fully in control of how this program is run, determining how much funding capital to set aside and adjusting that capital as seasonal liquidity fluctuates. Any seasonal liquidity issues could then also be managed by pairing the dynamic discounting program with a traditional SCF program. This would also allow the flexibility for third-party funding to fill any gaps that emerged due to potential, or periodic, lower cash balances available for the original arrangement.
Besides earning a return on excess cash, Dynamic Discounting can also reduce supply chain risks (in that financially more stable suppliers mean reduced supplier risk) and then strengthen supplier relationships. Conversely, on the supplier side it improves cash flow and provides early payment options, both of which save time, puts cash into accounts sooner and increases liquidity visibility. Benefits everywhere!
CSR Benefits – Risk Free Returns
There’s no such thing as a free lunch, but there are other compensating benefits to offset the initial costs of implementing a modern Dynamic Discounting plan, not least of which can be a significant increase in ROI on otherwise dormant cash without increased risk. After all, you are only effectively paying existing suppliers early, who you have to pay anyway, free of any additional counterparty risk.
And, as I mentioned earlier, today’s much more keenly scrutinised CSR credentials can also be significantly burnished by the support provided to often much-smaller suppliers down the food chain. That can then be more widely communicated directly to CSR scoring tables which, in turn, recognise responsible buyers and suppliers.
So, to get the maximum benefit of the wind in your sails and the best performance from your assets, make sure you use the right technology to strengthen decision making. After that, understanding the challenge, minimising the risks and reaping the mutual rewards of Dynamic Discounting will enable much smoother sailing and help you optimise your liquidity!
Virtual Masterclass | Advanced Treasury & Cash Management
| 06-05-2021 | François de Witte | treasuryXL |
How do you deal with constant change and uncertainty?
As treasury continues to expand its influence, delving deeper into the business and providing advisory services and tech solutions to increase efficiency, flexibility has become paramount. From building resilience in an environment of shifting risks to providing innovation to support business growth, much more is expected from treasury leaders today.
What will the next decade look like for treasury leaders? The past 10 years, with high levels of uncertainty, volatility and changing technology, have upended traditional treasury. Then along came Covid-19 to bring new risks and induce more anxiety for corporate growth and stability, never mind completely altering the way we work.
We’re delighted to introduce the Advanced Treasury & Cash Management Masterclass which is a live 3 half-day program of 4 hours each designed for finance, treasury and banking professionals who have practical experience in various roles in treasury management and who need to gain a deeper practical knowledge of advanced treasury management techniques in today’s changing environment.
Key takeaways and outcome of the program
Ensure that you are operating best practice in the current economic climate and receive the latest update on industry developments through the key topics:
When?
June 2-4, 2021
Who Should attend?
About The Trainer: François de Witte
After having worked for more than 30 years in banking, François launched his own consultancy activity, FDW Consult Services BV, specialized in Banking, Finance and Treasury consulting. From 2014 to 2016, he was also Solution Partner Treasury & Finance at USG Professionals. Since then, he took up several assignments, including one in the automotive sector with Ginion Group and with Ibanity, part of Isabel Group in the area of PSD2 and Open Banking. He currently is Senior Project Manager Treasury at Gaming1 (part of Ardent-Group). He is also independent Director at CKV, a niche mortgage and savings bank & Community Ambassador of treasuryXL.com.
François is lecturer of the course “Advanced Treasury” and “Cash and Working Capital Management” in the Mastersprogram “Finance and Treasury” at the Lille Management School, at the Treasury Courses at the Vlerick Business School, at Febelfin Academy, and at SBM Opleidingen. He has also a leading role in the Certificate in International Treasury and Corporate Finance Management organized by ATEL and the House of Training in Luxembourg. François has a Master’s degree both in Law and Economics from the Katholieke Universiteit Leuven.
Register now and receive a 20% Discount
Register by sending an email to [email protected] for further instructions
Market movements could impact your business—stay on top with Rate Alerts
06-05-2020 | treasuryXL | XE |
Rate Alerts are a quick, simple way to monitor the changing values of your choice currencies, without having to constantly check the markets.
If your business purchases goods or services from overseas, makes income from overseas, or deals at all with foreign currencies, exchange rate movements can and will impact your business and its bottom line. The degree to which they’ll affect your business will depend on the types of transactions you’re making, the frequency of your transactions, and the currencies that you most commonly work with. But if you aren’t aware of the latest changes in the currency markets, your next payment could be quite a bit more costly than anticipated.
While it is crucial to monitor the values of the currencies you work with and stay on the pulse of movements in the currency markets, we understand it’s not always feasible to keep an eye on them. The currency markets are constantly in motion, and currency values can change multiple times per day, or even multiple times per hour. Who has time to constantly check the latest rates?
Fortunately, you don’t need to devote your time to monitoring the markets. With Xe’s Rate Alert tool, we can handle it for you, so you can devote your time to your business.
What are Rate Alerts?
Rate Alerts are a quick, simple way to monitor the changing values of your choice currencies—without having to constantly check the markets.
At Xe, we know the currency markets, and we’re happy to keep an eye on them for you. All you need to do is identify which currency pairs you’d like to monitor and your target exchange rates, and we’ll take care of the rest. We’ll watch the markets for you and notify you the moment your ideal rate is reached.
Want to give it a try now?
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Why set up a Rate Alert?
By setting a Rate Alert, you’re ensuring that you’ll know when it’s a good time to make your transfer. The currency markets can be volatile, and one change in currency values could have a dramatic impact on how much your business needs to pay for one transaction. If you have some flexibility in the timing of your payment, Rate Alerts will help you to determine when the rates are most favourable, so you can make the most of your money.
In addition to helping you save money, Rate Alerts will also free up valuable time. Rather than frequently checking the markets and poring over historic currency data, you can take just a couple of minutes now to set up your Rate Alerts. You’ll know as soon the rates are in your favour, without ever having to take time away from your business.
How to set up a Rate Alert
If you have your Xe account, signing up for a Rate Alert is quick and simple.
Sign in or sign up. If you haven’t registered, don’t worry. It’ll take just a few minutes.
Head to the Rate Alerts section. If you’re using the Xe app, you’ll enter through the ‘Charts’ tab.
Select your currency pair and set your target rate. You can either manually enter the rate you’d like or select a point on the chart.
Sit back and wait. We’ll be in touch as soon as your rate is reached.
Get Started
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About XE.com
XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.
Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.
Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multi billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.
Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.
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