The misuse of payables finance - Global Supply Chain Finance Forum (GSCFF) Commentary

Optimising the Cash Conversion Cycle is the corporate treasurer’s secret sauce. The crucial formula balances and measures out how the cash in a company is converted through inventory and accounts payable, sales and account receivable and then back into cash. Why is this important? Well cash is king, and so is liquidity, both for buyers and sellers. The buyer led programme, payables finance, is aimed to benefit both buyers and sellers, optimising working capital and the cash conversion cycle, whilst at the same time, providing sellers with alternative, potentially cheaper sources of capital, whilst allowing suppliers to get paid earlier. The supply chain finance technique of payables finance is regarded by the industry as a useful and beneficial tool for both buyers and suppliers. Yet recently, it’s come under significant scrutiny by the press, financial Ombudsman, and various regulators around the world. Add to this, the financial distress wrought by the Covid-19 pandemic, with SMEs tending to be the first to feel the effects of financial crises. Today we’ll be discussing this in much more detail, and I am delighted to be joined by three exceptional guests, who are ensuring payables finance remains a force for good. We have: Peter Mulroy, Secretary General of FCI, Stacey Facter, SVP of Trade Products at BAFT, and Christian Hauscher, Chairman of the Global Supply Chain Finance Forum and Product Manager for Trade and SCF EMEA at Deutsche Bank.