Economic challenges brought on by the COVID crisis have heightened the need for businesses to manage supply chains more efficiently, and in many cases that means turning to banks for the help they need.
Access to capital has always been more difficult for SMBs, and Vikram Gupta, head of the banking product engineering group at Oracle Financial Services, told PYMNTS the pandemic has only spotlighted transactional risks.
“Every people-dependent industry has seen some level of impact” Gupta said, noting that during this economically-distressed time, many small companies have found themselves stressed for working capital because of low demand, extended payment terms and rising inventory levels.
While efficiency brought on by digitization and the treasury function can both play a vital role in helping a business bolster working capital, banks can play a role, too.
“Banks can provide alternative, low-cost and less document-intensive forms of financing, like supply chain financing,” Gupta said. “Funding can even be extended to vendors or dealers as well as to the corporate’s balance sheet,” he added.
To that end, Oracle Financial earlier this month said it is offering a new supply chain finance feature to help banks deliver more flexible financing options. Offering early funding to supplier corporates or extended payment terms to buyer corporates is another way to help optimize working capital.
“Banks sit at a unique vantage point with the pulse on every payment going to their corporate client’s account,” he said. “Knowing when invoices are raised by the corporate and where capital infusion is necessary is the logical growth and partnership avenue for banks.”
By leveraging associated large corporates’ balance sheets, he said small corporates will have cheaper and earlier access to working capital, which in turn allows banks to generate additional revenue streams from interest and fees.
Supply Chain Financing
Gupta said there are a number of critical elements of automation involved in SCF. These include handling physical documents and converting them into actionable inputs for a business process, automating business processes for faster turnaround times and removing “banker’s bias.”
To do so, a range of advanced technology is used, including natural language processing (NLP) to convert documents into on-screen inputs and AI-based decisioning capabilities to reduce human error.
“Having a real-time view of information and input capabilities for both the end customer and the bank’s operational users means that everyone works off the same information, and has clarity on status and predictability of cashflow,” Gupta said.
Although he said spotting unmatched payment was by far the biggest problem in supply chain finance right now, Oracle’s efforts to automate and streamline the issue has made tracking them easier.
“Through various business rules, our platform can easily identify the parties associated with the payment and match it with outstanding invoices and finances in real time,” Gupta said, while also providing immediate status updates to corporates and banks.
Minimizing Disruption
Of course any software change of scale has to mesh with legacy systems already in place at financial institutions and corporates, which Gupta said Oracle has been able to do with minimal disruption.
By designing for complex environments that address different business needs fulfilled by multiple applications, Gupta said Oracle’s decades-long track record with banks allows it to build solutions that enable easy integration and progressive transformation.
“Our strategy is to provide an API for everything, which means that our applications are open to receive or provide inputs from the legacy systems in a bank’s ecosystem,” he said.
Access To Capital
Whether it’s an SMBs credit standing, unfavorable borrowing costs or lack of strength in their balance sheets, access to capital has always been an issue for SMBs, Gupta said. In addition, smaller companies also face challenges due to inefficiencies within their account payables and account receivables.
“The pace at which you can handle funds makes the difference between winners and laggards,” Gupta said. “Making money churn through the business is how any company makes more money.”
Taken together, he said, the present business climate makes a strong case for the need to streamline activities and eliminate complexity wherever possible.
“In the current environment, every penny that can be collected and every potential government funding that can be leveraged makes a dent, he told PYMNTS.
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