Perhaps you already have a supply chain finance programme, or you are considering setting one up.
​
The easy-to-use app below allows you to compare what you get from PrimaTrade's platform to a typical, traditional SCF platform .
​​
What are the key differences between PrimaTrade's platform and others?
-
P&L: PrimaTrade enables you to collect discounts from suppliers reflecting their participation in the progamme, booking a P&L win for each invoice that is financed.
-
Value multiplier: PrimaTrade includes "PO matching" - which requires suppliers to confirm which purchase orders are included in each invoice they submit. This enables early payment approvals to be safely provided before delivery and the traditional 3-way match - making early payments truly early. The economic value of your SCF programme multiplies as a result.
-
All suppliers: PrimaTrade has proprietary structures that enable it to manage supplier on-boarding and KYC economically and quickly. This means all your suppliers can be included, even the long-tail - and this enables you to reduce usage of expensive card programmes whilst increasing substantially the amount of P&L that you can book (see point 1).
​​
Using the simple comparison app:
-
Enter your total procurement spend, number of suppliers and expected SCF funding cost.
-
We then break down your supplier base into 3 tiers - and for each tier, enter some basic parameters about their payment terms, expected utilisation of SCF (if it were available) and the discounts that could be earned from suppliers. If suppliers are being paid by card, enter a few details about that card programme.
-
Finally enter some details of your current invoice approval process and likely timing for early payments.
​
The app calculates the total economic value of the SCF programme using your assumptions.
​
You can compare a traditional SCF approach with a PrimaTrade SCF programme. To put the benefits into context, we also provide a simple simulation model of your financials - enter a few key metrics and see the benefits of a PrimaTrade SCF programme in context.
​
Below the app, on this webpage, the calculations and methodologies used in the app are set out and discussed.
​
Calculations and methodologies
The app compares a PrimaTrade SCF programme to a typical, standard SCF programme. It shows the incremental value that a customer could obtain by upgrading to PrimaTrade SCF (or implementing from scratch).
​
As highlighted above, PrimaTrade is built-for SCF platform designed and built with current technology, rather than the technology available 20+ years' ago.
With the benefit of better architecture and better engineering, PrimaTrade's platform:
​
-
Can reach all the suppliers with a high level of automation - making it possible to offer supply chain finance across the enterprise and not just to a select few strategic suppliers.
-
Since supply chain finance can be offered to the suppliers that actually need it (smaller suppliers often further away), the economic value created is a multiple of a traditional programme. Moreover, PrimaTrade's technology allows the buyer to monetise that benefit for itself and to book and collected discounts on products reflecting the benefits that suppliers are getting.
-
Many clients also realise that an automated SCF programme offering very early payments efficiently is a better way to pay smaller suppliers than using payment cards.
​
The approach
​
The value of an SCF programme is made up of three components:
​
-
Supplier saving:
-
Suppliers get paid early, and so save the cost of borrowing money at their local rate. If suppliers get paid very quickly (ie: close to shipment), they can also save on credit insurance and improve their local credit standing as they can be paid before losing control of their goods.
-
-
Buyers income:
-
The saving that suppliers make can be made into a buyer P&L win through early payment discounts. In a PrimaTrade SCF programme, the buyer can set the early payment discount rate and bank the supplier's savings itself, without prejudicing the trade payable accounting treatment.
-
-
Buyer working capital:​
-
A result of the process is that the buyer can gain trade financing itself with the cost borne by suppliers - so this improves the buyer's operating cash flow and reduces the buyer's own interest costs.​
-
​
We can calculate all of these numbers given some assumptions about the value of the different components. Key inputs are:​
​
-
The supplier savings rate:
-
This is the financial rate that suppliers use to "value" the early payments, noting that if payments come at shipment rather than later after delivery, the supplier savings rate will be much higher since credit insurance can be avoided and local funding for the supplier becomes more efficient.​
-
-
The buyer savings rate:​
-
This is the value to the buyer of the trade finance that it receives at no cost to itself, effectively paid for by suppliers. In our app, we assume that this savings rate is the SCF funding cost.​
-
​​
The other assumptions in the app all relate to how the traditional SCF programme operates versus PrimaTrade SCF. Typically, traditional SCF programmes:
​
-
Provide early payments after delivery, so not that early.
-
Limit eligibility to larger suppliers in convenient jurisdictions.
-
Experience relatively low take up, because the eligible suppliers are not the ones that really need the early payments.
​​
PrimaTrade solves these issues - and additionally puts buyers in control by enabling buyers to set their own discount rates for access to early payments - effectively defining how the economic benefits of SCF are shared between the buyer and the supplier.
​
There are tool tips available throughout the app to explain what different inputs do. We have designed the app to allow the user to decide their own assumptions rather than using ours. The app will remember your inputs if you leave and then come back - and you can print out the findings for yourself if would like to have a copy of a particular set of calculations.
​
We would be very happy to discuss the app and PrimaTrade SCF with you - if you have questions or would like a more specific analysis. Internally we have more sophisticated models that we can use to create a fully-tailored simulation of a PrimaTrade SCF implementation.
​
​
​