Supply chain finance offers a solution for retailers

02/02/2012

Factoring and other invoice discounting and supply chain finance solutions can benefit retailers and suppliers during touch economic periods.

Experts claim that supply chain finance is a great way of ensuring that working relationships between retailers an suppliers survive an economic crisis. A system whereby a retailer and a supplier work with a bank, which supplies cash flow solutions, can help all parties involved in the deal.

The system works when a supplier and a retailer pair up with a bank, which pays suppliers based on their invoices as soon as they require the cash. The retailer then pays the bank when they are ready to do so. This solves the problems of suppliers wanting to be paid as quickly as possible, while retailers want to extend their credit terms as long as they can. This is an ongoing problem for the retail industry, which seems to be exaggerated during a recession.

Despite the obvious benefits, it seems that this kind of invoice discounting or supply chain finance solution is still underused in the UK and throughout Europe. However, as retailers begin to listen more to their procurement departments, more and more retailers are likely to use the system to safeguard their supplier relationships, even in the toughest of markets.