Supply chain finance offers suppliers a way to accelerate their own cash flow. Suppliers participating in a supply chain finance program have the option to get paid early – typically as soon as an invoice has been approved by a buyer. The supplier can accelerate payment on some, all or none of their receivables, depending on their financial position and funding requirements. For those receivables that are paid early, the supplier will pay a small finance charge or discount. Since the buyer is the obligated party, financing is offered to the supplier at rates that are typically more favorable because they are based on the buyer’s credit history and rating. For many suppliers, this access to a lower cost of funding is exceptionally important.

All of this occurs without negatively impacting either companies’ balance sheets. Accounting treatment for supply chain finance, when done properly, does not count as additional debt for a buyer or supplier.