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Cash & Liquidity Management
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Supply Chain Financing

by David Conroy, Americas Head of Trade Finance and Cash Management Corporates, Global Transaction Banking, Deutsche Bank

Traditional bank lending is increasingly hard to come by and the utilization of existing cash that is trapped in the supply chain is at a premium. With customary sources of liquidity and finance not being widely available, finding and accessing cash is more critical than ever. Cash is king and in support of this reality corporate treasurers are focusing on the company’s cash conversion cycle - how to convert assets to cash and maximize cash on a global basis. Taking a holistic approach to the physical and financial flows involved in the supply chain can lead to a range of benefits for buyers, suppliers and banks by uncovering the opportunities embedded in their relationship.

Acceleration of cash conversion

From a cash management perspective, it is important to look at corporations and how their customers pay them. Treasurers are focusing on accessing money that is outstanding from customers. The goal is to convert their invoices to cash more quickly. Some tactics for accelerated cash in the collection cycle are electronic payment enablement, quicker conversion of check to cash, direct debit, lockbox and merchant acquiring. Treasurers are also financing their receivables and seeking cost effective ways to keep their money longer on the payables side. Treasurers can address these issues in a manner that allows them to leverage their commercial relationships in a mutually beneficial way.

When correctly structured and implemented, supply chain financing solutions should provide a 'win-win' solution for all three parties-buyers, suppliers and banks.

An increasing percentage of today’s trade is taking place on an open account basis. That being said, the documentary management and export trade services business is critical for global exporters. By working with a bank partner, cash flow can be improved by reducing days sales outstanding (DSO). Deutsche Bank and other financial institutions offer on a global basis export trade financing solutions that support the conversion of assets into cash. These solutions can have a significant impact on the corporate’s balance sheet.