Photo of TPK Patro, Ceat Limited.

This solution offers Ceat a risk-free approach to diversifying its investment strategy, as Ceat makes discount income by paying approved supplier invoices early. The scalable marketplace model is independent of interest rate changes and market volatility and has increased yields ranging between 500-600 bps more than short-term investments.

Investment solution also strengthens this company’s supply chain

The challenge

With returns on short-term investments declining, Ceat wanted to develop an innovative approach to liquidity management. As TPK Patro, Vice President recalls, “Not only did we wish to improve the financial performance of Ceat, we also wanted to financially strengthen our supply chain, leading to overall business improvement.”

The solution

The treasury team combined their strong financial management practices, a surplus of cash, and access to low cost of capital with the C2FO early payment platform. With the platform, Ceat treasury determines the amount of cash they make available for early payments to suppliers and the desired rate of return. With this early payment platform, investment risk has been eliminated and Ceat maintains complete flexibility and control on their investment pool and performance.

In turn, Ceat suppliers, who access the online application without fees or paperwork, suggest an optimal discounted rate for the invoices they want paid early. Algorithms within the platform manage early payment acceptances, creating scale and eliminating the need for involvement from Ceat. Their ERP is automatically updated when invoices are awarded for early payment. Payment is initiated directly from Ceat to suppliers via existing bank channels.

Best practice and innovation

This solution offers Ceat a risk-free approach to diversifying its investment strategy as Ceat makes discount income by paying approved supplier invoices early. The scalable marketplace model is independent of interest rate changes and market volatility.

Ceat’s team solved multiple challenges across stakeholders – treasury, procurement, accounts payable, and suppliers – with a single solution:

1. Treasury – realised incremental returns ranging between 500-600 bps more than short-term investments with zero risk.
2. IT – ease of ERP integration and the secure, cloud-based solution meant technology set up and supplier onboarding took only a month and a half.
3. Accounts Payable – no changes to the AP process or additional headcount needed. C2FO manages all supplier communication on behalf of Ceat. The programme has eliminated ad-hoc supplier requests for early payment, eliminating disruptions to Ceat’s payment processing system, creating a significant gain in operational efficiency. Ceat’s de-centralised automated supplier payment approach, with exclusions for capital goods retention and strict policy governance, made ad hoc early payments to suppliers unmanageable before this solution.
4. Procurement – Supplier satisfaction with the solution averages 98% globally, helping improve relationships while decreasing financial risk in the supply chain

“Our suppliers now have an easy to use solution to manage their liquidity on demand by choosing which invoices they want paid early, their desired invoice discount rate, and when to accelerate payment on invoices. As a third-party solution, C2FO offered more accessible early payment from us, especially for suppliers who did not have a relationship with us that fostered transparent communication. The unique price discovery model provides more affordable early payment to suppliers than any other solution. The solution does not require underwriting or paperwork, meaning suppliers of all sizes can access the programme for liquidity management,” commented Patro.

Key benefits

• Increased yields ranging between 500-600 bps more than short-term investments.
• Higher supplier adoption rate.
• Early payment discounts increased.
• Added-value across the entire organisation.

There are other strategies that offer returns on short-term investments. However, no other programme could deliver as high a rate of return without any risk – gains which are not impacted by declining interest rates or market volatility – as well as providing liquidity management for Ceat’s suppliers.

“The collaborative nature of C2FO, where suppliers have control over cost and timing of early payment, makes the programme equitable for both ourselves and our suppliers,” concludes Patro.