All 22 Vendor Management questions
More in Vendor Management
What is maverick (off-contract) spending and how is it controlled? How do supplier portals improve AP and vendor management? What is vendor performance management and which metrics are used? What is dynamic discounting and how does it differ from static early-payment discounts? How can accounting treatment of supply chain finance affect the financial statements? How do you manage vendor risk (financial, compliance, and operational)? How is spend analysis used to manage suppliers strategically? How do you handle vendor master data governance across a large organization?
Advertisement
Accounts Payable & Receivable › Vendor Management

What is supply chain finance (reverse factoring)?

Advanced

Answer

In supply chain finance, a bank/financier pays the supplier early on approved invoices, and the buyer pays the financier at the original due date. It lets suppliers get paid sooner at a rate based on the buyer's stronger credit, while the buyer can extend or keep its terms. It differs from factoring, which is initiated by the supplier.
Real-world example Strategic suppliers opt into the buyer's SCF program to receive early payment at a low financing rate tied to the buyer's credit rating.

Common follow-ups: How does reverse factoring differ from factoring? | Why does the buyer's credit rating matter?

Credit Control Payment Runs Vendor Management
All 22 Vendor Management questions