Data key to give more control to suppliers

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In addition to cementing her place as Queen of Soul, Aretha Franklin was quite savvy when playing the payout game.

Aretha was paid for at least part of her fees in cash, in advance and in her purse… or she didn’t take the microphone. The rest could be paid, ultimately, by check.

As Rob rosenblatt, CEO of Alternative Finance FinTech On behalf of, Karen Webster recounted, clubs and venues were forced, because Aretha had what they needed – the ability to sell tickets, of course. This, in itself, is a sign of a vendor’s power to dictate terms.

It turns out that more traditional suppliers, manufacturers and distributors, as they navigate the ups and downs of B2B commerce, could learn a thing or two from the diva.

in a recent episode of the month-long PYMNTS / Visa B2B payments series that seeks to reinvent commercial payments in the digital economy, Rosenblatt said that in a world where providers have more leverage, they could potentially get paid. more – in advance – in the payment methods of their choice.

It may be conventional wisdom to assume that buyers hold all the power in B2B, but as Rosenblatt argued, suppliers have at least a few levers in place to speed up payment terms. In the meantime, they can reduce their DSOs to help improve working capital and cash flow, as ecosystems connecting all parts of the supply chain (including the consumer) take shape. The urgency is there as inefficiencies in supply chains stand out with glaring relief amid the pandemic, as container ships idle outside ports.

At a high level, he said, the platforms offer vendors that kind of leverage, with consistent data flow between both sides of those flows – accounts receivable and payables – which helps define conditions so as to benefit all stakeholders.

The concept is decades old

The model linked to these platforms is nothing new. Rosenblatt described a platform with roots stretching back three decades that connected grocers with their suppliers and manufacturers, as well as the consumer, with the goal of delivering relevant in-store loyalty coupons and offers.

“It was awkward,” he noted – perhaps not a surprise, given the relatively primitive technology that existed at the time. But the general theme remains the same: Data dominates the day, and the science and technology that exist in payments and consumer loyalty can now find their way into various supply chains.

The technological barriers that hindered this flow of information no longer exist, Rosenblatt said. The digital age has made distribution relationships more direct, and suppliers and buyers can tailor their interactions on an individual level.

Rosenblatt said: “The levers are all there,” for suppliers to pull: “From early delivery to exclusive products, to preferential product.” To achieve that level of exclusivity – what buyers want and sometimes need when boosting their own inventory – pricing is essential and discounts are essential, he said.

Suppliers ? Well, in a more perfect world, they can dictate the terms of anything that increases their own ROI, Rosenblatt said, whether it’s pricing or dumping old inventory. Buyers want to stock their physical – or virtual – shelves so they can meet anticipated consumer demand.

Across industries, buyers are reshaping their supply chains, learning not to depend too much on a single “chain” or set of suppliers, and in this case the balance of power shifts a bit towards sellers, producers and distributors who are proving themselves to play a vital role in establishing new (and even redundant) avenues for putting goods on the shelves.

Buyers can benefit, he added, by diversifying their supplier bases, letting smaller suppliers join in and in turn refining their own purchasing behavior and protecting the financial health of those suppliers.

A change in buyer behavior, he said, would require a change in values, which he says is taking place in American businesses.

“It is important to care about the supplier and to help the supplier remain a vibrant supplier and member of the community… the interests will not only be purely economic, ”he said.

Get away from the check

For now, at least, while it is ambitious for suppliers to be paid on demand, getting paid on time seems more urgent than ever.

More than $ 1 trillion is stuck in what you might call a credit spread for one type of payment to small and medium-sized businesses (SMEs) – those one-time payments that make up about 38% of their annual sales, of which 30 % are late – beyond agreed terms, and a staggering 60% of those debts are overdue, Webster noted, often by more than a month.

More than ever, there is a need for a vendor-created cash cushion, said Rosenblatt, linked to digital finance conduits.

“There is a certain ‘cost of capital’ that vendors / vendors will be willing to pay in return for the assurance that they can cover their payroll and pay the rent. This need is more and more pronounced, ”he said. To get an idea of ​​how much vendors are willing to pay, consider that the average discount on an invoice to get paid on time is almost 5%.

The myriad of funding available, the fragmented market that exists when many vendors clutter up the space, means the cost of capital is too high.

It’s an imperfect, friction-filled arena, the fundraising space. Quoting Oscar Wilde, Webster recounted that “experience is the name we give to our mistakes,” and to put it mildly, lender / provider / finance interactions are rich in experience (only a little ironic, Rosenblatt postulated that B2B is a road paved with many carcasses).

Many lenders have misjudged financial health or repayment capacity, in an environment where it is relatively easy to give money, but in difficult economic climates it is difficult to get it back.

He told Webster it was a cardinal rule to always believe in calculations – and to use common sense when lending.

“You can never have enough data,” he said, adding that the loan is “a game of good and bad odds when you’re in the finance business. And you must always, always look at data that might have seemed irrelevant, ”once upon a time. This would avoid stepping back too far – in other words, saying no to supply chain finance – simply because of a lack of visibility.

Going forward, ideally, Rosenblatt said, there should be a “slider” feature built into finance programs that allows buyers and suppliers to align with terms, discounts, and payment period that work. … case by case. A million different transactions could potentially have a million different term sets, aided by a robust flow of data points, analytical technologies, and platforms.

“In theory, there should be a fundraising vehicle for every transaction,” he told Webster.

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NEW PYMNTS DATA: DIGITAL BANKING STUDY – THE BATTLE OF BREWING FOR WHERE WE WILL BANK

On: Forty-seven percent of U.S. consumers avoid digital-only banks due to data security concerns, despite considerable interest in these services. In Digital Banking: The Brewing Battle For Where We Will Bank, PYMNTS surveyed over 2,200 consumers to reveal how digital-only banks can boost privacy and security while providing convenient services to meet this unmet demand.


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