Trade & Supply Chain

How Dynamic Customer Finance provides more control over receivables

Published: Jan 2021

C2FO’s Dynamic Customer Finance (DCF) enables companies to accelerate or extend payment of their accounts receivables, whenever it works best for the company and its customers.

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In business and finance, nothing ever remains the same. Today, a company may be in a strong cash position. A few months down the road, however, it may need to explore additional funding options. In tumultuous years like 2020, the fluctuations of business happen at an even faster pace. It makes the need for new systems free from antiquated financing programmes with static rates and covenants more imperative.

One focus is to help corporate supply chains generate the cash flow they need through early payment on their receivables. It’s a priority at C2FO, where our digital platform connects the receivables and payables of more than one million organisations worldwide and has generated over US$110bn in early payment for supply chains.

Vendors are not the only ones who stand to benefit from greater control over working capital.

DCF also provides tools for enterprises to accelerate or extend payment of their own accounts receivable, allowing for more flexibility and a quicker response to changing market conditions. It enables companies to manage their receivables on a continuum, activating early invoice payment when they need to build more cash flow. Elsewhere, it means companies can accept later payment from customers (in exchange for a premium) at times when cash flow is already strong.

“Working capital is inherently dynamic and constantly subject to a variety of internal and external factors,” says Suneel Chirunomula, Managing Director for C2FO. “C2FO technology now provides a central platform to help corporates manage these conflicting factors on both sides of the balance sheet.”

DCF helps organisations and their customers manage working capital in three significant ways.

1. Flexibility and control over receivables

A company’s cash position may change depending on the time of year, economic factors and seasonal sales gaps. At times when a company needs more cash flow, it can use the C2FO platform to accelerate payment on invoices at mutually agreed pricing levels.

If a company has ample cash, it may find it beneficial to delay outstanding payments from customers. This could include extending payment on receivables, in exchange for an agreed-upon premium. In other words, a company will be paid more to be paid a little later, while the customer benefits from an enhance cash position.

No other technology platform exists that enables extended payment from customers without an awkward negotiation about a premium. But the C2FO platform makes the acceleration and extension of receivables simple, with just a few clicks on the online dashboard. This on-demand flexibility gives companies greater control over working capital and allows them to respond quickly to changes that affect the business.

2. Companies can fund it themselves, or through a third party

C2FO’s Dynamic Supplier Finance (DSF) solution gives corporates three options in managing their payables. They can fund the programme through their balance sheet, through an outside funding source in C2FO’s global network, or use a blend of both. DCF works the same way for companies’ accounts receivables that DSF works for payables. If a company wishes to extend payment from a customer, it can draw from its own cash, a third party, or a mix of the two.

This mechanism is especially useful in times of economic hardship. Recently, a US$20bn global IT and consulting company needed to eliminate risk on multi-million receivables from a cash-strapped, major retailer in the United States. C2FO was able to curate a solution through DCF, enlisting a funder from its network to purchase the unpaid receivables, freeing up cash flow for the corporate, reducing risk and allowing it to continue doing business with the US retailer.

3. Use with C2FO’s other solutions

C2FO provides a single technology platform with dynamic solutions to help companies of all sizes meet their working capital needs.

Companies can use C2FO to manage their AP and AR in the same on-demand way. They can utilise DSF to accelerate or extend payment to suppliers, using their own balance sheet or a third-party funder. Likewise, they can use DCF to easily manage receivables with any of their customers. With C2FO, there is no need for multiple financial portals or funding programmes.

Borealis AG, a chemicals company based in Austria, uses C2FO to pay suppliers early, at rates that meet their needs. But Borealis also uses DCF as a dynamic way to control its own cash and receivables on the C2FO platform.

“With C2FO, we provide our suppliers a platform to accelerate invoices: they reduce their cost of finance and we improve our margin and cash yield,” said Jan-Martin Nufer, Borealis VP of treasury and funding. “At the same time, we have also developed an innovative offer for selected customers: the opportunity for dynamic invoice extension.”

More benefits

Additional advantages of launching a DCF programme include the following:

Customer connectivity: The DCF programme provides seamless reconciliation, collection and settlement with no delay and no negotiation.

Stronger relationships: Offering a programme that can help companies’ customers with their own management of working capital can lead to greater trust and an improved relationship with that customer.

Use it with any customer: C2FO provides access to early or delayed payment requests regardless of the customer. This can be accomplished through either a company’s own balance sheet or that of a C2FO funding partner.

Penetration: the flexibility and control over cash flow that DCF provides leads to a higher participation rate among corporates and their customers.

In conclusion

Companies’ trading partners need cash flow, especially in challenging economic times when banks and government programmes do not provide enough liquidity. However, large enterprises are not immune from market fluctuations and need to manage and protect their own cash positions.

DCF is an effective, flexible way for companies to manage their receivables in any economic environment, whether they need to be paid early to build cash flow or have the luxury of agreeing to be paid later in exchange for a premium. Third-party funding can be utilised when needed to mitigate risk and maintain customer relationships.

“We’re offering flexibility,” Chirunomula said. “There are times when you might say, ‘I have no intention of using my own cash at all because I want to preserve it.’ But a year from now, you may be facing a substantial cash surplus and you’ll have a different approach.”

In addition to other C2FO products like Dynamic Supplier Finance, DCF aids the management of working capital for everyone, regardless of where they are on a supply chain. And it’s all done from a single, easy-to-access digital platform.

To learn more about DCF and other working capital solutions through C2FO, visit https://c2fo.com/enterprises/our-platform/.

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