By Henning Holter, Head of Global Business Development, Tungsten Network Finance
As a smaller business, you will be well aware of the many ways friction can enter a supply chain and impair day-to-day business activities. This can include everything from losing paperwork and chasing for late payments, through to responding to enquiries and checking for fraudulent invoices. Ultimately, it slows processes down and can delay the payments we all rely on and sadly, many of these interruptions come as a result of the behaviour of other businesses. We believe being a responsible business is first and foremost about how you work with and treat your suppliers and this is something that every business, no matter the size, can adhere to.
You don’t need to feel intimidated or over-awed by the larger companies you work with. By adopting a few simple steps, you can help introduce a culture change that will positively reverberate throughout the supply chain.
Upfront candid conversation
At the very start of any relationship it is vital you discuss payment terms and make sure each party understands exactly what has been agreed to help avoid confrontation down the line through confusion or ambiguity. You can take a lead in this when dealing with your smaller suppliers and insist upon it when interacting with your buyers. In addition, ensuring that procedures are in place for each party to access funds more quickly if required, through a supply chain finance programme, can also allow customers some leeway.
Technology aids transparency and efficiency
Technology can really improve supply chain collaboration. By adopting e-invoicing, for example, the data is much easier to optimise, move, track and analyse than with paper-based processes. Digitisation can improve the entire dynamic between buyers and suppliers as everything is shared and transparent and suppliers become more like partners. E-invoicing improves the efficiency of the process and can also lay the foundation for a supply chain finance programme. The fintech industry is evolving to bring banks and e-invoicing providers together, integrating technology so that funding is provided in a ‘one stop shop’. These developments are making it easier for businesses to access payment even more quickly than the agreed terms, when it’s needed.
If larger companies in your supply chain are not currently on board with automating their finance function, you can argue that it will enhance the process from their perspective too. Because suppliers can track the invoice electronically in real-time and see what stage it is at, it can reduce inbound calls and emails to account payables teams by 60%, freeing them up to focus on other business priorities. It also strengthens working relationships as suppliers no longer have to chase or have awkward conversations about the status of an invoice.
Removing friction caused by global trade
If you are an SME involved in overseas trade, you will no doubt have welcomed the fresh and lucrative opportunities that have opened up over the last twenty years. However, the growth in global supply chains has also generated lots of friction, particularly in accounts payable. In fact, our research found that the average business wastes 6,500 hours a year on this issue.
Friction comes from complexity and regulation and we don’t see that diminishing any time soon. In fact, the imperative to regulate and control supply chains is only going to get greater as global trade increases. At Tungsten Network, friction is a problem that we’re trying to solve. In particular, the fact that we’re tax compliant in 48 countries – more than any other trading network in the world – means that SMEs trading across multiple jurisdictions can be sure of compliancy in each different country, removing the hassle, worry and friction from their supply chain.
It’s vital as a business community that we champion the importance of a healthy and most of all, frictionless supply chain where buyers and suppliers work in collaboration to achieve their goals. While this may seem like a lofty ambition, we believe that with good communication and the clever use of technology, it is possible to bring companies together to work efficiently and effectively.