Many companies are seeking to improve their working capital by reviewing the terms of their trade payables. To aid companies in streamlining their payables process, financial institutions built IT solutions to act as an intermediary between purchaser and supplier. As an intermediary, financial institutions can offer a liquidity solution to the supplier by way of factoring their receivables.
Observations from the front lines provides PwC's insight on current economic issues, our perspective regarding the business impacts, and actions we have seen companies taking to effectively address those issues.
Supply chain financing: What you need to know
Accounting guidance for these types of transactions is limited. In determining the appropriate accounting outcome, companies will need to work with procurement, treasury, and financial reporting to understand the roles, responsibilities, and relationships of each party to the transaction.
When analyzing supply chain financing transactions, it is imperative that accounting decision makers actively participate in the discussions with the stakeholders negotiating the transaction, including obtaining a thorough understanding of all the operational and economic aspects.
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