FINANCIAL SUPPLYCHAIN MANAGEMENT

 

The financial supply chain refers to the transactions that occur between trading partners that enable the purchasing of, and payment for, products and services, such as sending purchasing orders and invoices, and making payment. It  offers the cash flow required to ensure that the doors are kept open, that the lights are kept on, that workers are paid and that goods are manufactured and delivered.

According to a study, demand volatility 's impact on available cash and the risk of trading partner default are the top two pressures motivating manufacturers to concentrate on the financial supply chain. Manufacturers are pressured both internally (adding more inventory buffer to stop out-of-stocks) and externally when there is uncertainty in demand, with cash inflow declining and becoming less predictable. With a rise in the allowance for questionable accounts, the possibility of trading partner default would affect the value of receivable accounts

The financial supply chain management(FSCM) approach identifies and analyses interrelated events affecting working capital, terms of payment, pricing, and inventory. Moreover, the desires and activities of employees and departments in the company are taken into account by FSCM. Sales trends, for instance, may be impacted by employee bonuses, scheduling delays, shifts in department heads, or sudden resignations.

It is the end-to - end process involving the procure-to - pay cycle, control of working capital, and business processes of the order-to - cash cycle. This includes everything inside it that is part of purchasing, invoicing, reconciliation, and payment. The overarching aim of the management of the financial supply chain is to gain and retain visibility in all of these systems so that your supply chain can be as efficient and leverage on cost savings across the chain as possible.

Three elements make up the FSCM: the procure-to - pay cycle, the management of working capital, and the order-to - cash cycle. It also considers the desires and behaviours of divisions (and their employees) in the company , in addition to concentrating on the financial information flow in these processes. Sales trends, for example, may be impacted by employee compensation, changes in department heads, sudden resignations, and delays in scheduling.

It is important to create expectations for consistency in both our P2P and O2C periods, regardless of our company's current size, for the greatest chance of efficient and effective FSCM. As we expand, it will make everything easier to handle by getting regular procedures in place.

Using technology saves many man-hours spent on paperwork, decreases the risk for error, and holds everyone responsible. It will help reduce the duration of our O2C period by combining your processes, which will make a huge difference in our usable working capital.

The quicker we can buy and reconcile those invoices with the products and services we need for production, the better deals  can negotiate with our suppliers. The sooner we can get our goods and invoices into our customer's hands, the more profits we can generate.