How to Optimise Your Supply Chain Finance Strategy?

A group of financial products known as supply chain finance enable companies to extend their terms of payment to suppliers while giving them the choice to receive payment ahead of schedule, thereby optimising cash flow.

There are several obstacles in the way of efficiently managing cash flow and working capital. Careful preparation is needed to strike the correct balance between investing in long-term growth and preserving enough liquidity. Moreover, cash flow can also be affected by unanticipated costs, shifts in consumer behaviour, and economic changes.

How to Optimise Your Supply Chain Finance Strategy

Key Strategies for Optimising Your Supply Chain Finance Strategy

1. Considering Supply Chain Finance Without Recourse

First, you need to understand supply chain finance without recourse or non-recourse factoring. In this, the factoring company assumes the credit risk of your clients. This implies that in the event that your clients miss payments, you won't be responsible for paying back the factoring amount. This can provide greater financial security and reduce your credit risk exposure. It can also improve your cash flow by providing immediate access to funds.

But the risk with it is that it can come with high factoring fees. Besides, there are some factoring companies that can put restrictions on the types of invoices they will factor.

Below are the ways to evaluate if non-recourse financing aligns with your business needs.

➢     Credit risk assessment: You need to assess the creditworthiness of your customers to determine if non-recourse factoring is a suitable option. For example, if your customers have a high risk of default, then this factoring can be particularly beneficial.

➢     Cost-benefit analysis: You can compare the costs associated with non-recourse factoring to the potential benefits, such as improved cash flow and reduced credit risk.

2. Exploring supply chain financing in India

You can find research government-backed initiatives and programs that are supporting supply chain finance in India. You can learn more about them through:

●        Government websites such as the Ministry of Commerce and Industry.

●        Industry associations and chambers of commerce

●        Financial institutions like banks and non-banking financial companies (NBFCs)

3. Utilising Supply Chain Finance Solutions

There are many supply chain finance solutions that are technology-driven and thus can streamline supply chain processes. These solutions can effectively automate tasks, improve data accuracy, reduce error, and accelerate cash flow. Below are some examples:

●        Supply chain management software

●        Inventory management systems

●        Electronic invoicing and payment systems

There are other non-technological solutions:

●        Negotiating better payment terms

●        Identify cost-saving opportunities

4. Leveraging Supply Chain Finance Companies

One of the best ways to manage the supply chain finance process is to associate with reputable supply chain finance companies. Conduct thorough research to find these types of companies. Make sure to shortlist the companies that have a proven track record and positive client testimonials. You can attend industry events, conferences, and webinars to connect with them. Also, you can leverage your existing business network to find them.

After finding your ideal supply chain finance company, you can utilise it to optimise your cash flow through:

1. Expert Guidance: These companies have in-depth knowledge of supply chain finance and can provide valuable advice on how to improve your cash flow and working capital management.
2. Risk Management: These companies can also help you manage risks, such as credit risk and supply chain disruptions.
3. Tailored Solutions: These companies can offer customised solutions to address your specific needs and challenges. Besides, they can analyse your business operations and recommend the most appropriate financing options.

Through collaboration with a trustworthy supply chain financing provider and investigation of your alternatives, you can optimise cash flow and boost financial performance.

M1 NXT is a well-known international trade financing services platform. It helps companies improve their cash flow by providing access to financing options and streamlining supply chain processes.

Why Choose M1 NXT?

●        Global Reach: You can access international factoring products to support your global business operations.

●        Optimal Cash Flow: You improve your cash flow management and financial stability.

●        Risk Mitigation: It mitigates risks associated with international trade and currency fluctuations.

●        Innovation: You can benefit from its innovative financial solutions designed to meet the challenges of today's digital economy.

●        Future-Ready Technology: Its advanced platform is equipped to handle the complexities of modern business operations.

●        Seamless Experience: Its user-friendly interface and efficient processes streamline your financial transactions.

●        Enhanced Security: Your financial data is protected by its robust security measures.

Conclusion

A number of barriers exist when it comes to effectively managing working capital and cash flow. There are various ways to optimise supply chain finance, including utilising supply chain solutions and finding companies that look after this process. M1 NXT is the one that is future-ready and has the resources to look after this process of supply chain finance. M1 NXT is regulated by the International Financial Services Centres Authority (IFSCA), ensuring compliance with international standards and regulations.