Benefits of implementing Reverse Factoring or Supply Chain Finance initiatives between Buyer organisations and Suppliers. Implementation process and collaborative platform are also described in the document.

1. Dematerialised & collaborative
Supply Chain Finance solutions
May 2010
Fabien Jacquot
Confidential Information - Corporate LinX SAS

2. 1 – Presentation CLX
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3. An introduction to CLX
• CLX is an independent French organisation (SAS) with a UK presence,
• Created in 2008, with the objectives to:
– assist Corporations reduce their operational costs, whilst optimizing their
Working Capital performance,
– Provide solutions and opportunities to financial organisations.
• CLX can address International organisations in bringing functional & financial
expertise as well as technical competence to build cost effective programmes,
• CLX is providing a unique expertise mixing dematerialised Purchase to Pay
(PtoP) transactions and the instrumentation of financial initiatives,
• CLX has been spun off from Bottomline Technologies (www.bottomline.co.uk) and if
required, can utilise their resources in several regions,
• CLX markets its own technical solutions and distributes complementary
solutions when required,
• A proprietary transactional Portal solution with broad functionalities enabling :
– the management of the whole ‘PtoP’ cycle,
– interfaces with other systems,
– Multi-debtor, multi-banks solutions
• CLX is collaborating with several financial organisations in the field of SCF
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4. Our positioning
Link up all parties allowing for the financing of Supply
Chain transactions (not as an intermediary)
Supplier
Fournisseur Buyer
Financier(s)
Supplier
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5. 2 – Context and
constraints
in Supply Chains
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6. Current situation –> Buyer organisations
• Increasing requirement to improve financial performance
• Improve cash flow management
• Reduce payment terms
• Enhance purchasing terms
• More requests for early payments emanating from suppliers
• Growth in transaction volume to be handled with impact on
accounts payable
• Long internal validation cycle for supplier invoices
• Lack of early visibility on accruals
• Rare possibilities to enjoy proposed suppliers’ discounts
• Conflictual relationships with supplier
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7. Current situation –> Supplier’s organisation
• Uneasy and expensive access to short term credit
• Requirement/urgency to enhance financial performance
• Costly management of account receivable
• Increase in overdue invoice payments
• Challenging situation with own suppliers
• Greater number of suppliers’ bankruptcies
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8. Current situations in the Supply Chain - Conclusion
• Conflictual relationships between suppliers and buyers; each
protecting their own financial situation
• Requirements for rapid improvements
• Legal enforcement of reduced payment terms in Europe
• Suppliers: expensive management of the receivables and frequent
late payments
• Buyers: late visibility on accruals and increased penalty conditions
for late payments
• Challenging access to easy and inexpensive credit terms from
banks
• Increasing number of suppliers bankruptcies impacting buyers
organisation (manufacturing, retail, etc)
• Solutions need to benefit all parties involved in PtoP transactions
=> increase in the number of Reverse Factoring or SCF initiatives
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9. 3–
Options to run
Reverse
Factoring/SCF
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10. Definitions
Reverse Factoring:
• Settle debt from suppliers against discounts on invoice value. As
opposed to forward factoring, financial terms are based on buyers
credit terms. Buyers settles with financiers on invoice due date.
Supply Chain Finance (SCF):
• Financing of the Supply Chain transactions allowing suppliers to
demand early payment for validated invoices or other collateral.
The Buyer is also implicated as it settles invoices directly to the
Financier in due time (or agreed prolonged due time between
Buyer and Financier).
Note:
• Through these 2 approaches, besides improved supplier
relationships, the Buyer can enjoy either discount on invoice
value, kick back (cash) payments from financial partners or
extend its payment time with financiers.
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11. What is attractive about Reverse Factoring/SCF?
For Buyer organisations, several options are available with
varied benefits for all participants.
• Reduce debt from suppliers:
Enjoy discount as currently offered,
Propose discount to suppliers.
• (Re-)negotiate credit terms with suppliers,
• (Re-)negotiate purchasing terms against early payment option,
• Respond to increasing demands for early payment and improve
overall relationship in the Supply Chain,
• Manage recent legal constraints (Europe),
• Manage cash flow with the choice between early payment or using
financial partners with potential profit sharing,
• Provide an additional instrument for ‘negotiation’ to the
procurement team.
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12. How do these schemes work?
With 2 or 3 participants: 2 combinable schemes
• R.F. between 2 parties =
Buyer and its suppliers are facilitating early payment against discount on
invoice value
– Buyer manages and enjoys discounts directly by using its own working
capital,
– Supplier is being paid early by the Buyer against a discount on the
value of its invoice.
• R.F. between 3 parties =
Buyer involves financial partner(s) to manage supplier financing in using
credit terms based on its own credit rating:
– Supplier enjoys better credit terms as risk has been reduced for
financiers, risk being based on Buyer’s credit rating,
– Buyer settles invoices to the Financier on due date (or later),
– Buyer can enjoy kick back cash payments from financier(s) part of the
programme.
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13. Reverse Factoring/SCF with 3 parties
2- Buyer
11
Payment on due date
ERP updates
to modify payee info 10 1 Information received from
ERP/e-procurement solution
2
PO delivery
1 - Supplier
3
3 - Financier
PO aknowledgment- OK
7
4
Info delivered into ERP
Invoicing
5
Disputes-validation 8
statuts – Payment date Information received into ERP
6
Request or offer
for early payment
9
Early settlement
Note : this is not an exhaustive representation
of all transactions but provides an overview
Confidential how such programmes can be
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instrumented via a centralised & personalised hub

14. Modules of the transactional portal
Financing: Early e-invoice: e-PO:
Management via
payment/ Creation Receive from
financial discount: ERP
Control
partners Direct Transmission
management of Reject
Proposed to vendor
financing terms the early Send
payment vs Acknowledge
OK discount Acknowledge ment
ment
Notified Remittance OK
Rejection Advice Dispute
Notified
management
Choice in Rejection
payment date Credit or debit
note
Remittance
Advice
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15. Why use several financial partner(s)?
• Based on the Buyer organisation’s own objectives, using several
financial partners can provide :
– Competitive financial proposals,
– Diversity and size in credit lines provided,
– Flexibility in the management of the programme,
– Catering for a broader supplier base (geography, currency,
vertical, etc).
• Financial partners outside existing banking relationships can
present multiple opportunities,
• Participation from financial partners is managed via the unique
Portal enabling greater visibility and control over the programme,
• Corporate LinX (not as an intermediary) can facilitate the introduction
with financial organisations managing such programmes and
offering competitive conditions & credit terms
• Several methods can ensure competitiveness and transparency in
financial offerings for the benefit of suppliers.
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16. 4 –Principles of
using a
transactional Portal
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17. Benefits of using a transactional Portal?
To manage such complex initiatives requires a technical solution in
the way of a transactional and centralised exchange Portal
• All transactions of BU’s involved in the programme managed via a unique
Portal
• Recuperation of transactions/information from existing internal tools
(ERP, e-proc, EDI, e-invoicing, Supplier Intranet, etc)
• Central point for all European (& other regions) suppliers
• Early visibility on accruals
• Management toll (discounts managed directly or financing via financiers)
• Choice in usage & business models (license mode ou SaaS mode)
• Modular implementation (PO’s, invoicing, early payment, etc)
• Programme managed by Buyer organisation
• Reporting et centralised archiving for all transactions
• Portal adaptable to Buyer’s graphical guidelines
• Creation of a supplier network
• Management of several financial partners via a unique Portal
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18. What is the Portal’s role?
The transactional and collaborative Portal manages:
• A tripartite relationship between Suppliers-Buyer-Financiers
• All dematerialised transactions and audit trails
• Respective visibility down to unitary transaction level => shared
transaction status
• Format conversion between different data formats (in & out)
• Information recuperation from Buyer (PO, etc) and from suppliers
(Invoice, etc)
• Provide updated transactional data once processes have been
completed=> Buyer, Suppliers, Financiers
• Requests for early payments =>Suppliers
• Discount or Financial terms => Buyer, Financiers
• Adaptation to Corporate Graphic identity=> Buyer’s Corporate
compliance
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19. 5 –CLX’s
proposition
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20. CLX’s proposition
• If technology is pivotal in running Reverse Factoring/SCF
initiatives, expertise is also required to build and run
successful programmes.
• Corporate LinX is proposing 4 key components :
1. Specific expertise to evaluate and build each
programme on behalf of its client,
2. Select appropriate financial partners to participate in
the programme based on specific client objectives,
3. Provide its own CLeX Portal technology to run the
programme between all participants,
4. Assist in rolling out the initiative to key suppliers.
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21. CLX’s proposition
• Initial assessment of current internal situation with Buyer’s
organisation allows to create programme with ROI
=> Initial Statement of Work
• Determine most appropriate solution and the path to attain
objectives including technical interface to ERP
=> Documented functional & technical specifications
• Select most appropriate technical solution(s) and business model
=> SaaS mode ie subscription model or License mode
• Choose financial partners based on their offerings
by way of a Request for Proposal
=> Supply Chain Finance, Reverse Factoring
• Programme launch with selected supplier communities with
pre-agreed onboading objectives
=> Supplier roll out phase
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22. Proposed phases
Phases Objectives Delivrables Commitment
Evaluation phase & objectives
Documented of the most adapted solution
including interface with ERP and other
technical solutions (procurement, EDI)
Functional/technical specifications for
participating commercial finance
organisations
Introduction to selected Commercial Finance
organisations with expertise in Supply Chain Technical & functional
Finance programmes specification document Initial order for
Evaluation of the technical costs + Statement of Work only
and solution customisation request for proposal with for phase 1
Commercial Finance (no required commitment
Organisations for other phases)
Legal validation of the programme and External firm documented TBD
1 contractual architecture recommendation (external firm)
Pilote phase with limited number of Joint review of the results
participants in order to assess initial results versus set objectives for
2 vs objectives pilot phase
Roll out of the programme to a larger
supplier group and/or new BU’s
Assistance in rolling out the programme to Project team documented Contract for
3 suppliers (optional service) review phase 2 et 3
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23. Initial phase - Pilot
• Corporate LinX is proposing to test such financial initiative
by way of a 6 month Pilot Phase:
– Test the CLeX Portal utilised in a SaaS mode,
– Rapid Pilot implementation with 2 weeks work to set up
Portal in Buyer’s mode,
– Small technical implementation for the Buyer’s
organisation,
– Limited number of Suppliers with no technical work
required for them,
– Low costs for the Pilot phase,
– On review of the jointly agreed objectives, possible
extension to production phase and roll out to a greater
number of suppliers
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24. 2 options beyond the Pilot Phase
Long term commitment can be made out of 2 options:
1. Continue with the SaaS mode for an agreed yearly number of
transactions:
• Subscription amount based on forecasted transaction volume
• 3 year contractual commitment
2. License mode based on forecasted transaction volume:
– Purchase of a CLeX Portal license
– Implementation within Buyer organisation’s own technical
infrastructure
– 18% (per annum) based on license value for technical
support, corrective maintenance and product evolutions
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25. Contacts
• Tel : + 33 1 79 30 17 60,
• Email: contact@corporatelinx.com,
contact@corporatelinx.com
• Address: 43 rue Mauriceau, 92600 Asnières sur Seine,
France
• Web site: www.corporatelinx.com
• Join us on www.cfo.news and www.daf.info and other
publications
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