trade receivables solutions - gscf · 2 trade receivables solutions ... accelerating their cash...

Trade Receivables

Solutions

2 Trade Receivables Solutions

Our Trade Receivables Solutions let you shorten your DSO

and extend the DPO of your Buyers, allowing you to;

Improve liquidity for you and your Buyers

Enhance your Balance Sheet working capital position

Increase competitiveness by extending Buyer

payment terms

Reduce credit risk by transferring to a third-party

Obtain attractive short-term financing

We offer a range of solutions tailored

to your needs.

DPO DSO

▼DSO

▲DPO

DSO = Days Sales Outstanding/ Receivables days DPO = Days Payable Outstanding/Payables days

With GSCF, you can improve your working capital without compromising relationships in your supply chain.


Are you the Seller or Buyer

in the relationship that needs liquidity?

Receivables

servicing

Automatic payment

reconciliations, reduced

administration costs and

improved data visibility.

Extension of Buyer

Terms

Increased payment terms

to your Buyers without

impacting your working

capital or balance sheet.

Trade payables

financing

Buyers looking to extend

their payment terms, to

Vendors who do not offer

such extensions.

Vendor financing

Buyers extended

payment terms and offers

Vendors access to

financing, based on the

higher credit rating of the

Buyer.

Distribution

Financing

Maximising benefits for

all stakeholders by

combining reduced DSO

for Vendors and longer

DPO for Buyers.

Factoring

Improve your cash flow

by accelerating your cash

collections and reducing

your credit collection risk.

NO YES

Seeking to

shorten DSO

or extend

Buyers’ DPO?

Will the Seller

accept being

legally

involved?

YES NO

DSO

DPO

BOTH

BUYER SELLER

Trade Payables Solutions Trade Receivables Solutions

FUNDED UNFUNDED

Do you need to improve liquidity in

your supply

chain?

Which program is right for you?


Factoring

▼ Vendor DSO

= Buyer DPO

Program overview

Factoring allows you to improve your cash flow by accelerating your sales collections from a defined portfolio of Buyers.

A Vendor sells their trade receivables to a Funder, at a discount, accelerating their cash inflows.

The Funder assumes the credit risk and is repaid by the Buyer at the invoice due date.

GSCF works with you at every stage to understand your requirements and setup a program that matches your needs.

If the program achieves “True Sale” accounting treatment, the Vendor can remove the factored receivables from their Balance Sheet.

Funders usually obtain credit insurance to cover their risk of Buyer default.

Benefits to Vendor

Improved cash flow

Low cost short-term financing Balance sheet benefit – reduced DSOs

As well as all the benefits of Accounts Receivable Servicing (page 6).

Benefits to Buyer Trading terms with the Buyer remain unchanged

Ideally suited to Vendors with high-volume sales to a portfolio of credit assessable Buyers.

Who are seeking to increase liquidity and reduce credit risk.

DSO

Vendor

DPO

Buyer


Extension of Buyer Terms

= Vendor DSO

▲ Buyer DPO

Program overview By offering your Buyers increased payment terms you can enhance Buyer relationships and increase sales.

The extension is Off-Balance Sheet; meaning no impact to your credit risk, Balance Sheet or working capital.

Benefits to Vendor Enhanced Buyer relationships and competitiveness by offering increased payment terms

Timely settlement of receivables by Funder leads to predictable cash forecasts for Vendor

Mitigated credit risk (transferred to Funder)

Increased sales from Buyer liquidity benefits

Off-Balance Sheet, does not impact your working capital.

Alongside all of the advantages from Accounts Receivable Servicing (page 6).

Benefits to Buyer Balance Sheet benefit - increased DPOs

Enhanced Vendor relationship and competitiveness by receiving increased payment terms

Improved cash flow


Who are looking to increase sales by offering attractive

payment terms to their Buyers without impacting their

own Balance Sheet position.

DSO

Vendor

DPO

Buyer


Distribution Financing

▼ Vendor DSO

▲ Buyer DPO

Program overview

Financing program sponsored by the Vendor for a selected portfolio of Buyers whereby

The Vendor is paid earlier by the Funder

Buyers obtain extended payment terms

Due to the large-size and complexity of this type of program, Funders and Vendors prefer to leverage GSCF’s expertise. GSCF has an extensive track record of setting up and managing Distribution Financing programs for large blue-chip companies.

If the program achieves “True Sale” accounting treatment, the Vendor can remove the factored receivables from their Balance Sheet.

GSCF manages the complete program including on-boarding of Buyers, credit and collections, and reporting.

Distribution Financing programs are typically credit insured depending on the size and risk of the portfolio.

Benefits to Vendor

Enhanced Buyer relationships and competitiveness by offering Buyers increased payment terms.

Improved cash flow with Balance Sheet benefit – reduced DSO

Improved liquidity enables increased sales to Buyers

Reduced credit risk (transferred to Funder)

Timely settlement of receivables leads to more accurate cash forecasts

As well as all the benefits of Accounts Receivable Servicing (page 6).

Benefits to Buyer Balance Sheet benefit - increased DPO

Enhanced Vendor relationship and competitiveness by receiving increased payment terms

Improved cash flow


Who are seeking to increase sales whilst maximising liquidity and reducing credit risk.

DSO

Vendor

DPO

Buyer


Receivables Servicing

= Vendor DSO

= Buyer DPO

Program overview Your company outsources its credit and collection tasks to GSCF, who then manages your complete receivables processing;

invoice & credit note management

reconciliation of Buyer payments

management of individual Buyer credit limits

collection of Buyers´ financial statements and performing credit analysis

credit rating & monitoring of Buyers

automatic alerts and notifications of due and late payments

ensure compliance with credit insurance policy

Benefits to Vendor Increase monitoring of Buyers and reduce credit risk

Enhance credit & collections function

Reduce admin tasks and costs

We can assist the Vendor to obtain credit insurance and using our systems can lead to higher coverage.

Platform and external communications can be white labelled per Vendor preference.

Benefits to Buyer Trading terms with the Buyer remain unchanged.

Ideally suited to Vendors with high-volume sales looking to streamline credit and collection tasks whilst improving their risk management.

DSO

Vendor

DPO

Buyer


Our software platform

Our proprietary technology platform offers

unparalleled flexibility and automation for

management of supply chain finance programs.

Some benefits include;

Multi-currency, multi-lingual platform designed

for your global requirements

Fully automated processing that reduces

administration costs and risk of manual error

Credit limit approvals at Purchase Order stage

Real-time payment reporting empowering your

business to make informed credit decisions

Technically integrated with Funders and credit

insurers for reduced administration and faster

credit limit approvals

Visibility Web portal so you can always access your

program information.

Easy to understand, customisable dashboards

at summarised and detailed levels.

Identifies and notifies stakeholders of potential

credit risks automatically.

Automation Automated notifications and alerts

customized to your requirements

Real-time reconciliation of payments to

invoices and available credit limits

Credit limit requests automatically sent to

approvers enabling faster processing

Processing in accordance with credit

insurance policy conditions, always ensuring

compliance

Ease of Use A system that points you in the right direction

letting your people know what requires their

attention.

Extensive training from our multi-lingual

operations teams located across Europe and

the Americas.

Our in-house development team allows us to add further

individual features if required. ISAE3402

ASSURED


Typical Program Cycle

1 Order Placement

2 Invoice and goods sent out

3 Vendor uploads invoice data to GSCF system

4 Invoices verified by Buyer

5 Report sent to confirm amount due to Vendor from Funder

6 Funds paid to Vendor by Funder

7 Report sent to Buyer confirming amount payable and due date

8 Buyer pays amount due to Funder on agreed terms

Notes

* By changing the timing of steps 6 and 8 relative to standard credit terms determines

the improvement in DSO and DPO for Vendor and Buyer.

1

2

3 4

5

5

6*

*

7

8*

Vendor Buyer

FUNDER


FAQs

1. What type of Buyers could be considered?

GSCF can consider any type of Buyers, as long as they are credit-assessable

and have an established relationship with the vendor, showing a good trading

track record. Buyers in A/R based programs are typically distributors or

resellers, although they can effectively be from any industry operating with

open-account. GSCF recommends providing a well-diversified portfolio of

Buyers that are not in distress.

2. Are programs disclosed or undisclosed to Buyers?

Programs can be structured to the preference of your company.

3. Is there a cap on the program size or number of Buyers involved?

There are no limitations in terms of program size cap or maximum number of

Buyers involved in a program. GSCF can set-up and manage sizeable A/R-

based transactions with a total program limit in the billions of dollars with

hundreds of Buyers. GSCF has special features that assist large deals, such

as participation management (for Funders that bring in participants) and

watch-lists/scorecards/dashboards (for credit managers overseeing large

portfolio of Buyers), amongst others.

4. What is GSCF´s experience with credit insurance?

GSCF has a vast and successful experience with credit insurance, having

long-standing partnerships with the world-largest credit insurance companies.

GSCF can help in both - structuring insured-programs, i.e. finding the right

underwriter/s and assisting in the insurance policy drafting; and also servicing

insured-programs, ensuring that the company stays compliant with the

conditions of the policy at all times. Credit insurers appreciate the risk

management tools and transparency granted by GSCF´s processing and tend

to have increased appetite on GSCF-managed programs.

5. How much will a program cost?

SCF programs are designed to be more competitive than short-term bank

financing due to the lower level of credit risk taken by the financing party

(Funder).

Program cost will be determined by:

The term of financing required

The level of credit risk involved for the Funder

Possible use of credit insurance on the Buyer(s)

Level of processing complexity involved i.e. multiple

currencies/jurisdictions

Legal setup costs (depends on country)

6. How long after sale of invoice can I receive payment?

A minimum of one week is needed, depending on the program Funder.

7. What is the accounting treatment of an A/R program?

GSCF can structure A/R-based programs whereby the Vendor (also called Seller,

Originator or Vendor) sponsoring the program achieves “True Sale” of the trade

receivables sold to the program Funder. This means that the A/Rs are taken off-

balance sheet, allowing the Vendor to reduce Days Sales Outstanding (DSOs)

thus enhancing its working capital and operating cash flow. It is worth noting that

the accounting treatment will be ultimately defined by the company´s auditor and

will depend on the applicable accounting rules.

8. Will there be a level of Vendor recourse required?

Typically there is a certain level of recourse to the Vendor required, but not

always. This depends on the level of risk involved for the Funder. Where

recourse to the Vendor is required, GSCF’s structuring experts will work with your

business to achieve “True-Sale” accounting treatment.

9. What information would you need from us during the program?

In order to initiate discussions on program parameters and the evaluation of an

A/R portfolio, we will request you to complete and return an application providing

details on the Account Debtors (Buyers) such as annual purchasing volumes,

payment terms to be granted, aging of Receivables, etc. During the day-to-day

operations of a program the Vendor is only required to submit the Accounts

Receivable data to GSCF and this procedure can be fully automated and

supported via a range of industry-standard formats and transmission methods.


10. What are the key milestones and timelines to implement a program?

Below is a high-level overview of the steps leading to the successful

implementation of an A/R financing program:

Initiation: Submission of A/R portfolio and collection of your financing

requirements.

Structuring: GSCF reviews with its partner financing institutions, including

credit insurance providers if required, and reverts with an indicative Term

Sheet explaining the solution structure proposed for your consideration

including:

Credit limits for Buyers in the portfolio

Terms of the program, including payment terms offered to Buyers

Initial pricing estimate

Conditions precedent to program activation e.g. Buyer financial statements

Information required for a final offer

Process Definition: Once the Term Sheet is signed and we approach

activation of the program, our Business Operations team collects your

reporting requirements and performs any implementations required in order to

customize our platform and its capabilities to your specific needs.

Activation: Once the applicable agreements are executed, we will perform

the final steps leading up to program activation, such as:

Conduct technical discussions and perform testing for transmission of A/R data to GSCF’s platform.

Perform onboarding of Buyers in the portfolio

Conduct training sessions on using our web-accessible portal

Set up user accounts and accesses to the program portal

11. How will GSCF support my business once our program has been activated?

Upon setting up a program a dedicated Credit Operations team will be

assigned to the program and will be responsible for activities such as

performing and monitoring day-to-day tasks and communication related to the

program, as well as handling queries and requests.


To learn more about our products,

technology platform and financing

options please contact a member of

our team.

Global Supply Chain Finance Limited

+41 41 922 2200 Tel

+41 41 922 2201 Fax

www.gscf.com

Gotthardstrasse 2, 6300 Zug, Switzerland

Matthew Reddington

Business Development Manager

+41 41 922 2264 Direct

[email protected]

Asad Umar

Business Development Manager

+41 41 922 2261 Direct

[email protected]

http://www.gscf.com/

trade receivables solutions - gscf · 2 trade receivables solutions ... accelerating their cash...

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