Financial Supply Chain Management

The Financial Supply Chain refers to end-to-end trade processes and information that drive a Company's Cash flows, financial accounts and finances including working capital. The buyer side transaction begins with procurement and ends at payment whereas Seller side transaction commences with order and ends at realization post intermediate process, if any. Intermediate process covers accounts receivable & payable, Cash Management, Working Capital, Transaction costs, Risk and Administration.

Finance Supply Chain Management covers diverse activities: What and how to pay?; When to pay?; How much to pay?; Whom to pay?, and just-in-time-cash in order to complete the business cycle.

Physical Supply Chain and Financial Supply Chain are closely integrated where Finance part commences with availing pre-shipment finance or Purchase Order financing through letter of Credit or Buyer Financing. Post shipment documents sent on collection basis where buyer’s credit facility or supplier’s credit facility could be availed. Alternatives could be post-shipment finance or Inventory financing from Banks/FI. Another option is to assign the international bills by availing Forfaiting services or assigning domestic bill for availing finance from a Factor. Book-debt financing is another avenue available to supplier.

Functional Perspectives of Financial Supply Chain Collaboration broadly covers Investing, Accounting and Financing. Investing could be from Investors or Government. Investor finance could be external financing whereas Government could fund out of dividends or Tax collections. Accounting is generally meant for keep record of trail of transactions taking place. Financing could be from Banks or Financial Institutions. Sources of Financial Services could be external and same could also be used for paying fees and pay-off loans.

Keep watching this space for the remaining part of Financial SCM!