FinTech: Future of Accounts Payable
Financial services technology is evolving exponentially. It’s forcing traditional institutions to re-think their approaches as competition to capture the market increases.
This broad, emerging technology is providing opportunities to small businesses and multinational corporations to grow at the speed demanded. A network of trust glued together by financial incentives across all participants is the future of accounts payable.
“Traditionally banks have used ‘reverse factoring’ to finance supply chains. However, according to new Central Bank statistics, bank credit for small-medium sized enterprises (SMEs) has declined for the 23rd consecutive quarter.”
Pioneering accounts payable from a hassle into opportunity is LiqEase, a company which utilizes the blockchain to help finance supply chains.
LiqEase is a decentralized marketplace, where companies sell invoices to third party investors before the work is completed. This puts cash into the company’s hands based on the promise of completion, and is then written into the immutable Cardano blockchain. Traditionally banks have used ‘reverse factoring’ to finance supply chains. However, according to new Central Bank statistics, bank credit for small-medium sized enterprises (SMEs) has declined for the 23rd consecutive quarter.
LiqEase helps solve this problem by giving third-party investors a chance to invest in unfilled invoices and receive a small profit. A supplier doesn’t need to get approved by a bank, nor does a buyer have to personally finance their supply chain to grow. By simply approving their issued invoices on LiqEase, a buyer creates a layer of trust to entice third-party investors to purchase the invoice, which helps boost their supply chain’s finances, keeping them both happy.
Why Would a Buyer Approve an Invoice on LiqEase?
When a buyer approves an invoice, it’s supplier can get the cash liquidity they need to produce the order and continue their own expansion.
This opens the potential to extend payment terms between the two parties, because the supplier already has the cash they need for the project. Payment window extensions immediately improve a buyer’s balance sheet and credit rating.
A buyer’s RFQ also becomes more competitive, allowing them to hand pick the best suppliers. A financially stable supplier means less disruption to the supply chain, production, and sales for buyers. This provides an opportunity for cash flow to nurture relationships.
Completing the Circle
For LiqEase’s ecosystem to function, each participant needs to be individually incentivized. So, why would an institutional investor complete the circle by purchasing an invoice on LiqEase?
An institutional investor is interested in low risk, competitive returns, and new opportunities.
LiqEase helps identify investment opportunities that fit personal risk tolerances in an entirely new asset class. One that represents the account payables of some of the world’s largest and most trusted businesses. B2B trade finance products are traded on a liquid market 24/7. Investors can trade an entire project, split it up into smaller projects, or bundle it together with other projects. Being able to repackage digital assets like this is attractive to investors who are looking to create a portfolio of investments with different risk/return ratios.
The Big Picture
The future of accounts payable is an ecosystem, where technology incentivizes an entire supply chain, from the manufacturer to the purchaser to the investor. LiqEase creates this financial incentive ‘glue’ to help foster growth throughout the entire organization. However, trust is not a native adjective of supply chain incentives, and a truly productive organization must be incentivized financially with trust.
LiqEase creates this trust through a secure, open, and decentralized infrastructure.
What does that mean?
A buyer, seller, and invoice purchaser are able to independently ensure the authenticity of every trade in LiqEase’s database. Using the open sourced Cardano blockchain, every transaction can be audited regardless of user credentials; meaning all participants can trace the flow of goods, services and financial transactions with LiqEase.
The blockchain removes the need for third party intermediaries to validate information. Participants of the supply chain not only can upload, approve, finance, sell, and buy as sovereign entities, they are all strategically incentivized to do so.
At LiqEase, we understand the issues that plague businesses. We are building a network of trust designed to help SMEs and multinational corporations where they need it most — finances.
If your supply chain struggles to find the cash flow they need, join us today in the future of accounts payable, and foster a happy and financed supply chain. Learn more about LiqEase trade finance solutions here.
*This article was originally published on LiqEase blog.