Negotiation Strategy: Financing
The video explains the financing strategy in the ADA Platform, which entails offering early payments through external financing to suppliers and ensuring cost neutrality by comparing proposed financing rates with the estimated cost of financing for the supplier.
Financing Strategy Overview:
- Introduction to the financing strategy as a method to pay suppliers early through external financing.
Objective of Cost Neutrality:
- The primary goal is to ensure that the extension of payment terms, facilitated by early payments, remains cost-neutral for the supplier.
Detailed Analysis in the ADA Platform:
- Clicking into the strategy provides an in-depth analysis, featuring a cash flow opportunity of $162.1 thousand.
Key Metrics:
- Shows an example highlighting the estimated increase of 19 days in payment terms.
- Supplier's financing rate is estimated at 8.04%, with an early payment rate of 6%.
Optimization Opportunity:
- Identifies an opportunity to optimize payment terms to 79 days, allowing the supplier to receive payments earlier.
Supplier Benefits:
- Explains how the financing program benefits the supplier by offering the option to get paid earlier after approval.
Cost Comparison:
- Compares the cost of getting paid earlier in the financing program to the supplier's current cost of financing a 60-day receivable.
Cost-Neutral Impact:
- Emphasizes that the lower financing rate offered in the financing program offsets the impact of longer payment terms.
Incremental Cash Flow Gain:
- The overall result is seen as an incremental cash flow gain of $162.1 thousand for the specified payment terms of 79 days.
0:00 - The next strategy we're going to look at is the financing strategy. The financing strategy is the strategy to pay the supplier by offering early payments via external financing up to the level where the extension of terms is cost neutral for the supplier.
0:15 - By comparing the proposed financing rate with the suppliers estimated cost of financing. When you click into it, it goes into a more in-depth analysis on the strategy.
0:26 - So we see here that there's 162.1 thousand dollars in cash flow opportunity, a reminder. Week. Week. We'll see you in the next We'll the next This is in the currency which is selected at the top bar.
0:35 - Payment term change would increase by 19 days. We're estimating this supplier has a financing rate of 8.04% and the early payment rate is 6%.
0:46 - So, When we compare that, we see that we've identified an opportunity to optimize our current payment terms to 79 days.
0:53 - With this financing program, the supplier benefits by having the option to get paid earlier after the emotions are approved and based on the low financing rate offered by the financing program.
1:03 - The cost to get paid earlier in the financing program are lower than the cost the supplier currently has to pay to finance its 60-day receivable.
1:11 - Therefore, the impact of our new payment terms opportunity of 79 days is cost neutral for the supplier. Since the lower financing rate, we all offer with the financing program is offsetting the longer payment terms.
1:23 - So the increase in terms represents an incremental cash flow gain of 162.1 thousand dollars
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