Treasury Today Country Profiles in association with Citi

SCF: pointers from procurement

Group of people throwing paper aeroplanes into the air

Would you like to know the secret of better SCF onboarding? A lot of it comes down to how you communicate with your suppliers. We ask a corporate procurement director to share his tips.

From special TMS modules to add-ons for Purchase-to-Pay solutions, these days there’s an abundance of options for treasurers that want supply chain finance (SCF) without reaching out directly to a bank.

But whatever vendor one selects, picking the right solution is not the end of the job for the treasurer. Indeed, it’s often what comes next that is the most challenging part of the process.

For SCF to be considered an unmitigated success, the buyer must be able to bring on board all of the trading partners it has designated. But even with all the benefits SCF has to offer suppliers, there are always some who are going to take a little more convincing.

What steps can be taken to ensure a better chance of success? Since the procurement department is the commercial link to the supplier base in most firms, these would seem the perfect people to ask.

“I think it comes down to how a project is handled,” David Loseby, Group Procurement Director, at the multinational transport company Arriva recently told Treasury Today. “Even simple things like first piloting a solution before going ahead with a full-blown roll out are now and again overlooked. A more structured and considered approach will have more phases to it and the finance may not come through as quickly, but what it does give you in the long run is something more sustainable.”

When it comes to the specific issue of handling reticent suppliers, Loseby’s advice is simple: put yourselves in their shoes. It is all about communication. First, the treasurer must not keep in the dark counterparties who will be impacted by a project. Secondly, when treasurers do inform suppliers about a SCF scheme they wish to enrol them on, they must make an effort to communicate to them in a language they understand. Financial jargon, then, should be avoided at all cost. “The rules of all these things are actually very straightforward: keep it simple and keep the communication going, keep it transparent and there is a good chance of success,” he says.

Finally, Loseby says, treasurers should, at the very outset, consider whether the solution they are looking for fits with the project’s objectives. Noting that there is a lot more to choose from today in the SCF market, he says that the choice between going through a bank proprietary solution or an independent third-party, is made a lot simpler when one knows what one is trying to accomplish. “There have been a lot of developments in the technology space and, as a consequence, that starts to open up new opportunities. If there is an objective to ensure incorporation of SMEs, then that might start to drive a different approach in terms of looking at solutions from niche providers more geared up towards solutions in that market. So that is the overarching imperative for me – understand what is driving the requirement and then work from there.”

In the forthcoming issue of Treasury Today we will be taking a closer look at the battle between banks and technology vendors for the SCF market, and why it is important, as Loseby says, to know “what one is trying to accomplish” before choosing a solution.