On our previous post, we established the difference between Supply Chain Finance (SCF) and traditional vendor-finance solutions like cash-discounts or p-cards. But — how exactly does SCF work?
This post covers the SCF operational process from both the buyer’s and vendors’ perspectives, highlighting the changes compared to today’s processes.
SCF Process — Overview
The SCF process allows the vendors of a sponsoring buyer, to have any approved invoice paid early by the SCF solution provider. No matter what — with SCF, the buyer never pays early.
The SCF system monitors the buyer’s ERP system to identify newly-approved invoices. Once a new invoice is approved, the system sends the vendor that issued the invoice an early payment offer. Lastly, it directs the buyer who is the payee of the invoice i.e either the SCF provider (if the invoice was paid early), or the vendor (otherwise).
So — what is the operational process like, from the buyer and vendors perspective?
SCF Process — The Buyer’s Perspective
Payment process — without Quartix: A $10,000 invoice that is approved after 5 days by the buyer (as an example).
Approval of an invoice is done by the buyer, once it finds that the received goods match the vendor’s invoice. Via its ERP plug-in, Quartix monitors the ERP, awaiting new invoices to be approved.
Quartix’s plug-in: Quartix installs a simple ERP plug-in that does two things:
1. It monitors the ERP to detect invoices that were newly approved,
2. It sends the buyer an update re who is the payee of an invoice, a few days prior to the invoice maturity date.
We will dive deeper into the actual implementation of the ERP plug-in in one of our future posts.
Payment process — with Quartix: Exactly like the process without it! The only addition is that the vendors are now being offered optional early payments by Quartix, in a way that is completely transparent to the buyer.
Quartix’s plug-in is compatible to most commercial ERP systems, so the technical implementation process is typically a matter of a few weeks. The invoicing process is unchanged, and so are the buying / payment processes.
The daily operation: None. Quartix’s plug-in works completely in the background. Quartix provides different reports to the buyer, to make sure it is aware of all vendors’ activities on the platform, for internal tracking purposes.
SCF Process — The Vendors’ Perspective
Collection process — without Quartix: Vendors get paid 100% of the invoice at its maturity date by the buyer.
Collection process — with Quartix: Whenever a vendor needs some extra cash, it may:
1. Log in to the Quartix portal,
2. View the available amount of outstanding approved invoices, and submit a request to have it paid immediately (the entire amount, or part of it).
3. Receive the funds within 24–48 hours.
As a default, vendors get paid 100% of the invoice at its maturity date by the buyer (exactly the same as before).