The rise in inflation has significantly increased the cost of corporate borrowing. This has reinforced the need to optimize working capital flows along the supply chain to prevent payment delays from causing crises among stakeholders. Supply chain finance, as a set of solutions for financing working capital, enables the creation of financial interactions among stakeholders, including third-party involvement, to enhance client-supplier relationships. Various services fall under supply chain finance (SCF), currently impacting about a quarter of the total transaction volume of Italian supply chains. The Osservatorio upply Chain Finance of Politecnico di Milano has estimated the value of the Italian supply chain between €525 and €585 billion, with 22-25% of this amount transacted through SCF instruments. Supply chain companies can benefit from SCF if they can access these services in a cost-effective and streamlined manner, which digital platforms facilitate. A case study is PlusAdvance, a fintech founded in 2017, which now handles €2 billion in transactions and serves over 2,500 supply chain stakeholders.
Active and Passive Cycle
The supply chain finance services market is outlined by the Supply Chain Finance Observatory of Politecnico di Milano. It includes invoice advance payments, factoring (both direct and reverse), credit cards, future receivables sales, confirming, invoice trading, and dynamic discounting. Based on PlusAdvance’s direct experience, the services that have received an immediate market response from the outset are dynamic discounting (company liquidity), confirming (bank liquidity), and credit cards (issuer liquidity). The Italian supply chain finance market has evolved starting from dynamic discounting, where the client company chooses to support its supply chain by making early invoice payments in exchange for a discount. In the large-scale retail sector (GDO), according to PlusAdvance’s experience, suppliers have sought efficient financing for their active cycle with the goal of accelerating cash inflows without relying on traditional bank credit lines.
Maggiore efficienza
As always, the market ultimately decides based on overall and specific conditions. But which supply chain finance instruments are most widely used by Italian companies? Among the various SCF tools, dynamic discounting is the most efficient, as the customer pays the supplier directly without third-party involvement. However, this approach is only feasible if the company has sufficient financial resources to cover its working capital flows within the required timeframes. Additionally, an increasing number of suppliers are requesting advance payments. In these cases, companies tend to opt for confirming, as it overcomes the challenges of reverse factoring. Unlike reverse factoring, which requires a long-term agreement with a factor (typically lasting 2 to 36 months, during which all receivables are assigned), confirming allows suppliers to use it on a spot basis. With confirming, suppliers can assign 100% of their receivables without recourse, even on a single invoice. This is made possible by the interaction and communication capabilities provided by digital platforms. The key takeaway is that optimizing supply chain finance also means ensuring that individual transactions do not get stuck.
Field Experience
Pam Enhances Purchasing Efficiency
The Veneto-based retailer, with €2.4 billion in revenue and 684 stores, has adopted the PlusAdvance platform to optimize purchasing and enhance supplier liquidity. The platform matches the discount that suppliers are willing to offer with the discount Pam aims to achieve on the liquidity allocated for advance payments. This process helps identify invoices eligible for early payment.
Unicoop Tirreno Speeds Up Payment Processes
Unicoop Tirreno’s goal in adopting PlusAdvance is to reduce invoice payment times and increase liquidity by lowering debt exposure. The chosen tool is dynamic discounting, which enables early collection of payments before due dates, reducing outstanding trade receivables caused by delays.
Supporting Businesses
It all started with the entrepreneurial idea of creating a fintech company to develop solutions aimed at improving working capital management. This idea emerged at a time when Italy lacked a technological application for financial transactions within the supply chain, unlike Anglo-Saxon markets. From this vision, PlusAdvance was born. The initial focus was on providing financial services to the large-scale retail sector (GDO) from the very beginning of its operations. Mark Up interviewed Massimiliano Gattari, CEO and founder of PlusAdvance.
What is the origin of PlusAdvance, and what is its purpose?
In 2019, PlusAdvance entered the market with its dynamic discounting solution, supporting its first client in the GDO sector. Initially, an incubation period was necessary to allow the market to familiarize itself with the services offered. Today, PlusAdvance is the only independent platform in supply chain finance management, enabling companies to achieve sustainability goals while supporting the entire supply chain. .
What is your business model?
PlusAdvance is a cloud-based service platform with a low monthly subscription fee that integrates with ERP systems and treasury management software. In addition to the subscription, there is a success fee based on the products used, which determines the platform’s earnings. PlusAdvance also has partnership agreements with providers of confirming and credit card issuance solutions. .
Which sectors do you operate in, and what services do you offer?
Our initial success came in the large-scale retail sector (GDO) through collaborations with companies like Pam Panorama, Dimar, Unicoop Tirreno, and many others. When we first launched, interest rates were negative. Today, with significantly higher rates, it has become even more crucial for businesses to support their supplier networks. In response to these evolving needs, we have developed solutions for managing both the payables cycle (dynamic discounting, confirming, and credit cards) and the receivables cycle (dynamic request to pay, invoice factoring). .
Does the platform also offer tools to assist users in selecting financial products?
Yes, the platform acts as a true assistant for financial operations. Through the available data, the algorithms create optimized scenarios that are proposed to the parties involved. These scenarios are based on the objectives entered by both clients and suppliers. This is the most complex and interesting aspect of the services provided. Naturally, it is crucial to combine technological innovation with the value derived from the human relationship with the client.
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