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Embedded Options Make Supply Chain Finance Easier

As cash moves in and cash moves out of firms, as goods make their way across borders and supply chains, keeping track of it all is a complex endeavor, to put it mildly.

And now, things have gotten a bit more complicated, at least from an accounting standpoint.

As reported this week by The Wall Street Journal, companies based in the United States are now required by the Financial Accounting Standards Board to disclose details on their supply chain financing programs.

In broad strokes, these firms will have to report the outstanding balances tied to those programs and disclose the terms of the financing arrangements, too.

Delving into the rule itself, which was proposed back in December of last year and takes effect early next year, seeks to address the fact that clearer accounting would help spotlight the effects these programs have on working capital, liquidity and cash flows.

Critical for Suppliers 

The programs themselves offer a critical lifeline to suppliers, where various payables arrangements can help buyers pay their vendors early (and with a discount in place), often through third-party financing.

On the accounting aspects:  The FASB noted in its discussion of the rule that “there is a lack of transparency about supplier finance programs….[as] a buyer party may present obligations covered by those programs in the same balance sheet line item as accounts payable or in another balance sheet line item depending on the facts and circumstances of the arrangement.”

Keeping track of it all can thus be a challenge. Embedded finance options can help. As we have noted in past coverage, B2B interactions are taking on the flavor of consumer-facing commerce, where platforms, payments and all manner of back-end functions converge to streamline buyer/supplier relationships. Within that convergence, embedded finance programs and supplier portals can ensure that financing is transparent, too.

In just one recent example,  Mexican FinTech eFactor Network has teamed up with B2B supply chain finance firm PrimeRevenue to expand access to financing to Latin American agribusiness companies.  Last year, PrimeRevenue launched its SurePay platform, which is designed to simplify B2B payment services and allow for early and on-time payments across the entire supply chain.

Read Also: PrimeRevenue, eFactor Team on Supply Chain Financing

The urgency is there, as PYMNTS has found that $3.1 trillion is the net amount U.S. firms are owed in accounts receivable on any given day, as detailed in the “Trade Credit Dilemma Report.”

Elsewhere, as PYMNTS’ data has shown, 40% of companies have said that said innovations to their accounts payable (AP) systems are more important than other innovation efforts. A continuum of back-end integrations and embedded options can give finance teams a better view of how their financing and payments programs are impacting cash flows and financial positions on a day-to-day basis.

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NEW PYMNTS SURVEY FINDS 3 IN 4 CONSUMERS WITH STRONG DEMAND FOR SUPER APPS

About: The findings in PYMNTS’ new study, “The Super App Shift: How Consumers Want To Save, Shop And Spend In The Connected Economy,” a collaboration with PayPal, analyzed the responses from 9,904 consumers in Australia, Germany, the U.K. and the U.S. and showed strong demand for a single multifunctional super apps rather than using dozens of individuals ones.

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