On the finance trail

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Sitting down to write about money on what the papers say is the most depressing day of the year might seem a trifle perverse.

But there is no doubt that supply chain finance is going to be a major issue for organisations over the coming year.

In the US, a study by CFO Research Services has highlighted the fact that eight out of ten financial executives say their companies are working on projects to manage their working capital more effectively.

In addition, they expect their companies to manage their supplier relationships actively as they prepare for renewed growth. They are especially concerned about stabilising the supply base and ensuring that key suppliers remain responsive and flexible to buyers’ changing needs in a changing environment.

The study also found that many organisations are already either using or considering supply chain finance  to achieve a wide range of benefits – in particular through the mutual commitment to work together.

This ties in with research by Demica which found that Europe’s top 40 banks also expect further strong growth, driven by demand for supply chain finance programmes among larger corporate clients.

Demica, which specialises in working capital IT, argues that supply chain finance allows large buyer organisations to extend their payment periods, while allowing their suppliers to be paid more quickly.

It also holds out the possibility of improved cash flow management; reduced risk of supplier failure in the supply chain; and improved transparency of transactions between suppliers and buyers.

With the world economy expected to grow by 3.3 per cent this year, the funding pressure for global supply chains is only going to increase. Perhaps this is not the moment to be at the trailing edge.

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