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Offsetting supply chain disruptions with working capital initiative

Supply chain disruption is no longer a temporary bug, but a continuing feature. Now, it has been two years since we are into a global pandemic that has transformed the way we operate supply chains. Sooner we believe the end of crisis is near, a different set of challenge pushes supply chain into a pit. The so-called new normal is highly volatile. However, supply chain professionals focused on efficiency in pre-pandemic era the focus has shifted to agility and resilience to keep the supplier operations perpetual.

The crisis has thrown supply chains into an atmosphere of volatility creating uncertainty in logistics and major transformation in consumer demand. In regards to supplier, late payments push many companies to draw their working capital to pay their bills thus resulting into insolvencies.

To stave off instability, banks have rolled out supply chain finance programmes to suppliers who face cash flow gaps by providing them immediate payment on outstanding invoices without coercing the buyer’s working capital. Working capital and cash flow are the two important metrics to keep close watch on for efficiency, liquidity and overall health of a company. Without sufficient fund, a company cannot meet daily expenses, pay employee salaries, and make other payments.

Holding working capital is not only useful for a business but also downright necessary. If your business carries accounts receivable i.e. the sales for which you don’t receive payment immediately, you require cash to keep the business continuing. It becomes need of the hour while the business is expanding as there is a need to pay for materials and labour to continue the production process and it takes time for customer payments to catch up with your cash expenditure.

To avert the ship sinking for SMEs under such circumstances, Aurobees’ AuroPayBiz assures to manage the credit risk of the seller and buyer to improve their cash flows and working capital requirements. AuroPayBiz provides mileage to suppliers to receive invoice financing, a form of short-term borrowing to suppliers based on outstanding invoices. Here, sellers get shortened days sales outstanding and buyers get extended days payable outstanding. Apart from invoice financing, AuroPayBiz also provides option for buyers to make payments using commercial cards and for suppliers to receive payments in T+1 day through our acquiring partners.

Businesses must enjoy an impeccable rhythm of selling goods and services to use the incoming cash to finance future operations. But in reality, there is a discrepancy when you sell a product and when you get paid. A well-managed working capital helps to create strong financial shield to finance the current operations.

Overall, a working capital initiative can help a company offset the effects of supply chain disruptions by providing it with a cushion of cash to fall back on. By implementing such an initiative, a company can be better prepared to weather any disruptions that may come its way.

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