Use Case
Payable Financing in Autoparts Manufacturing
Invoice Discounting solutions to improve cash flow for buyers and sellers.
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Unlock capital trapped in invoices and improve liquidity.
Payable Financing enables corporates & vendors to receive short-term
funding against their account payables.
funding against their account payables.
Background
This prominent automobile company serves various automotive segments, including passenger vehicles, small & light commercial vehicles, medium & heavy commercial vehicles, tractors, and two-wheelers, both in India and globally. It operates as a conglomerate with a diverse range of suppliers, all under a single ERP system.
However, the group encountered challenges in harmonizing processes across divisions and introducing a shared supplier discounting solution without causing financial strain on the suppliers.
However, the group encountered challenges in harmonizing processes across divisions and introducing a shared supplier discounting solution without causing financial strain on the suppliers.
Challenge
The introduction of supplier discounting programs raised liability issues for both anchors and sellers. Suppliers were cautious about participation due to concerns about potential balance sheet liabilities, while anchors faced the risk of constraining their borrowing capacity.
The company's diverse ecosystem, encompassing multiple banks, products, and vendors, demanded a centralized solution to standardize and streamline the discounting program across the entire group.
The company's diverse ecosystem, encompassing multiple banks, products, and vendors, demanded a centralized solution to standardize and streamline the discounting program across the entire group.
Approach
Utilizing the Cashinvoice platform, the company engaged banks for reverse factoring of invoices, effectively removing obligations from the anchor's balance sheet. This allowed sellers to receive payments with no recourse.
A custom SAP program was developed to link individual company ERP systems, consolidating the discounting solution at a group level within the Cashinvoice platform. This innovative implementation provided vendors with access to discounting for services offered to all group companies collectively. Tailored technology configurations facilitated seamless communication between systems and banks, reducing the need for corporate manpower and streamlining the discounting program while minimizing reconciliation efforts.
A custom SAP program was developed to link individual company ERP systems, consolidating the discounting solution at a group level within the Cashinvoice platform. This innovative implementation provided vendors with access to discounting for services offered to all group companies collectively. Tailored technology configurations facilitated seamless communication between systems and banks, reducing the need for corporate manpower and streamlining the discounting program while minimizing reconciliation efforts.
Result
- Suppliers benefited from the PayEarly early payment option, boosting their access to capital for business growth.
- The reverse factoring solution safeguarded the anchor company's financial stability by avoiding any adverse impacts on its finances.
- The unified discounting program reduced administrative burdens and enhanced operational efficiency, leading to resource savings.
- The anchor company's borrowing capacity remained intact, unaffected by the discounting program's implementation.
