Can supply chain financing be the perfect tool to obtain Net Zero? At InvoiceNxt, we believe it can! Trillions of dollars are locked in the supply chain at every given moment. That is, trillions worth of goods and services have been provided but not yet paid for. This amount exceeds the unmet financing needs of SMEs in Asia multiple times.
Supply chain financing is on the rise
Supply chain financing has been on the rise since 1990, accelerating since the financial crisis in 2008. According to the newly released World Supply Chain Finance Report 2021, only in 2020, the total volume of supply chain financing in Asia increased by 35% to 227 USD bn*. However, most SME suppliers in Southeast Asia and India have no access to this form of financing, let alone visibility of the entire p2p cycle.
In Southeast Asia and India, payment terms of 60 and more days are the rule. And to make matters worse: Even in Singapore’s well-funded and efficient economy, less than 50% of SME invoices are paid on time**. SME suppliers are generally paid so late that investments in solutions to manage receivables and collections become justifiable, though they barely address the symptoms and certainly do not heal the underlying problem.
All across Asia, a fast-growing invoice financing industry is ready to provide funding to meet SMEs’ need for working capital to sustain or even grow their business.
Lack of trust
Still, most SME suppliers cannot access this money. Acquisition costs and fraud risk make underwriting most (!) transactions unattractive for lenders. In today’s reality, lenders are not able to consider small invoice amounts below 10k USD, which make up most SME transactions in emerging markets. And even if invoice volumes are higher, KYC- and fraud prevention requirements delay decisions regularly for weeks, often forcing SMEs facing cashflow gaps to source for funds in the informal sector at horrific terms.
For a better world
The current global pandemic will permanently change the importance of environmental, social, and governance (Net Zero) concepts. In turn, this is leading to an integration of Net Zero-considerations in supply chain financing, maybe by offering better terms in exchange for environmental initiatives and advances in sustainability. In any case, only well-funded supply chains will be able to consider necessary investments to increase efficiency, reduce resource consumption etc.
The world’s supply chains need uncomplicated access to finances at fair terms, InvoiceNxt provides the technology to make this happen.
Better management of supply chain financing means everyone wins!
Buyers, suppliers and lenders
InvoiceNxt unites all three parties in one network: Corporate buyers, SME suppliers and lenders. InvoiceNxt allows corporate buyers to monetise their already existing data. Also, SME suppliers can access the urgently needed cash flow with a single click. In the end, lenders can underwrite even the smallest invoices at zero marginal costs. Mimicking smart contracts, InvoiceNxt is true FinTech, with no humans in the loop, and every aspect is 100% automated.
* World Supply Chain Finance Report 2021
** Research by XERO, published in November 2020, SMEs are Leaking Money Due to Late Payments (sbo.sg)