Unlocking cash in your supply chain

Transcription

1 Unlocking cash in your supply chain Rabo Supplier Finance

2 Supplier Finance 1 Supplier Finance Improved stability in the supply chain 2 Supplier Finance process Four steps to Supplier Finance 3 Supplier Finance benefits Both buyer and supplier benefit 4 Supplier Finance example Extending payment terms without negative consequences 5 Rabo Supplier Finance platform Easy to use platform accessible through Transact

3 1 Supplier Finance Improved stability in the supply chain What is Supplier Finance? Supplier Finance is a service offered by a buyer to facilitate cash flow towards its suppliers. Why Supplier Finance? Supplier Finance enables buyers to extend their payment term while suppliers get access to fast and cheap cash. Who uses Supplier Finance? Are you a buyer with a strong credit profile and your suppliers are in need for early payment? Rabo Supplier Finance might be the solution for you! Supplier Finance concept Supplier Finance is a partnership between a buyer, a selected group of suppliers and Rabobank. In this partnership, Rabobank pays the suppliers of the buyer earlier than the contractual payment term. For this early payment, a discount is applied to the invoice amount. This discount is based on the credit rating of the buyer and the payment term. The buyer pays the full invoice amount to the bank on the maturity date of the invoice. For the supplier, this means fast and relatively cheap cash.

4 2 Supplier Finance process Four steps to Supplier Finance Buyer 2 Approved invoices Payment term buyer Suppliers 1. Buyer receives, checks and approves invoices from suppliers as usual; 2. Buyer uploads approved invoice information to Rabobank via automated web platform; 3. Suppliers are paid immediately as soon as the approved invoices have been received by Rabobank. The amount paid to the supplier is discounted by the payment term agreed between buyer and supplier and the Supplier Finance margin based on the credit rating of the buyer. At a margin of 3% and a payment term of 60 days this discount would be 0.5% and supplier receives cash immediately; 4. The buyer pays the bank 100% of the original invoice at maturity date.

5 3 Supplier Finance benefits Early cash for suppliers, increased payment terms for buyers Benefits for both buyers and suppliers Supplier Finance enables buyers to pay suppliers immediately at a relatively small discount, to be paid by the supplier Except for the buyer s internal set up costs, the buyer does not pay for Supplier Finance In return, the buyer can negotiate longer payment terms (extend DPO) or purchase discount Supplier Finance does not impact the balance sheet of the buyer: the program does not classify as debt but remains trade payable Supplier Finance can help suppliers in their financing need Supplier Finance is supported by a fully automated process, no manual intervention Improved invoicing and relationship through transparency Global coverage View our animated product explanation

6 4 Supplier Finance example Extending payment terms without negative consequences Invoice Remaining days in the Payment term extension Day 0 approval 5 payment term 60 Situation A: Invoice of EUR 1,000,000, with a payment term of 60 days and supplier cost of capital of 6.0% 6.00% 6.00% 10,000 Day Situation B: Supplier uses a Supplier Finance program (100% benefit for supplier) 6.00% 2.25% (=Euribor + SF margin) Supplier s finance cost 4,271-57% Day Situation C: Supplier uses a Supplier Finance program and buyer extends payment term (shared benefit) 6.00% 2.25% 2.25% Day Supplier s finance cost Supplier s finance cost 6,146-39% Supplier Finance enables buyers to extend payment terms without negative consequences for their supplier Let s assume a buyer receives an invoice with an amount of EUR 1 million, and a payment term of 60 days. The buyer needs 5 days to process and approve the invoice. The cost of capital for the supplier is 6%, which is based on the suppliers credit strength and (local) market conditions. Situation A shows the cost for the supplier without a Supplier Finance program. The supplier will be paid after 60 days by the buyer. This means that the supplier needs to finance itself for this term at 6%, resulting in financing costs for the supplier of EUR 10,000. Situation B shows the cost for the supplier when participating in a Supplier Finance program. After Rabobank receives the approved invoice from the buyer, the discounted invoice amount is immediately paid to the supplier. The applied discount is calculated using the days left in the payment term (55 days) and the Supplier Finance margin which is based on the credit rating of the buyer (Euribor + 2%). The supplier has to finance the first 5 days at its own cost of funds (6%). In total this results in decreased financing costs for the supplier by more than 50%. Situation C shows the cost for the supplier in case the buyer extends its payment term to 90 days. The discount on the invoice amount is now based on 85 days left in the payment term. Dispite the longer payment term the cost for the supplier are still c. 40% below its initial cost. A win-win situation.

7 5 Rabo Supplier Finance platform Easy to use platform accessible through Rabo Transact Supplier Finance offers a fully automated web platform with no manual document handling, which can be directly connected to the ERP system of the buyer, reducing the administrative burden usually needed in international trade. This gives full transparency to all parties involved on invoice and payment status. It also helps the supplier in its cash flow planning, as it is the supplier who can determine what invoice will be paid at which moment. Why Rabo Supplier Finance platform? Enables tailored discount solutions per supplier SOX compliant solution (embedded segregation of duties) Offers extensive reporting and monitoring possibilities Interfaced with Rabobank s core payment factory (3,500 clients, 15mln monthly payments, 250,000 accounts) Centralized in Utrecht with global coverage Dedicated supplier on-boarding desk Supplier-friendly platform (local language support)

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