Trade and Working Capital Solution
Trade and Business in Singapore
Trade is the core essence of businesses and the engine of growth for all economies. At 3.5 times, Singapore has the highest trade-to-GDP ratio in the world – this conveys the importance of a robust trade and finance ecosystem for sustainable growth.
Trading terms vary depending on the industry, volume and value of trades involved. For example, a B2C company will sell on cash terms, an engineering installation company will invoice based on milestone progress payment, a coal trading firm will likely negotiate based on Letter of Credit (LC) terms due to the high value of goods, etc. Nonetheless, the most common trading term will have to be Open Account (OA), where it is typical for B2B trades to be transacted based on an average of 30-90 days credit terms. This is due to industry trading norms, requests from bigger buyers with higher bargaining positions, and overall competitiveness in order to attract and retain customers. In terms of dominance, OA terms constitute around 80% of global trade by volume.
Small and Medium Enterprises (SMEs) account for nearly half of Singapore’s GDP and employ more than 70% of the country’s workforce. However, nearly all of them confront cashflow issues because working capital remains locked in the supply chain in the form of accounts receivables and accounts payables. Suppliers suffer cashflow crunch because of long credit period and buyers suffer poor returns on their excess working capital assets. Traditional means of obtaining finance to ease working capital woes are costly and complicated. Businesses that have excess cash invest it at low rate of returns. Unlocking the liquidity in the supply chain is the key to solving the problem.
Trade Cycle Problems Faced by Suppliers and Buyers
Suppliers often have to wait several months before receiving payments on their invoices and may experience tight cashflow. To ease cashflow pressures, suppliers can seek financing but are often challenged by high borrowing rates, limited credit lines, and lengthy bank documentations and processes.
Larger buyers who have excess cash positions at various times of the month often earn negligible returns on this cash.
Trade Marketplace Solution – Smart, Flexible and Trusted
Along with our partner JEDTrade, we offer a digital Trade Marketplace where SMEs can optimise their working capital flow. Suppliers, buyers and lenders looking for prospects with minimal risks, are brought together in this marketplace – a digital platform for exchange of trade finance and working capital. The orders to buy and sell for upfront/early payment at a discount are collated, analysed, matched and routed by the digital marketplace to the trading partners in the supply chain.
With our intuitive, dynamic and secure Trade Marketplace solution, you can optimise win-win outcomes between suppliers and buyers, thereby enhancing trade relationships. Powered by our partner JEDTrade, the solution allows for:
- Easy access to your entire network of buyers and suppliers in a few clicks
- Verification of optimal rate and timing of early payment for both your buyers and suppliers to achieve maximum business sense
- Collation and organisation of responses from multiple buyers and suppliers efficiently, with downloadable reports for user management and easy decision-making
- Need reduction in terms of obtaining financing from banks, hence saving on interest costs
Fast, Hassle-Free and Easy to Use
|Bilateral trade relationships that are visible and accessible only to each supplier-buyer pair||Dynamic mechanism optimizes win-win outcomes between suppliers and buyers||No complicated system integration required – companies can continue with their existing invoicing and payment process/arrangement|
|Trusted cloud – 50% of Fortune 500 uses Microsoft Windows Azure Cloud||Smart technology enables efficient handling of large amounts of trade data and variations||Downloadable reports for User management|
How It Works
Suppliers needing liquidity would offer a discount for early payment on outstanding invoices to their buyers and buyers sitting on excess working capital would offer to make early payment for a discounted selling price to their suppliers. This making of offer is referred to as raising a GoJED Campaign.
The JEDTrade marketplace routes and matches the campaigns in real-time to respective trading partners and routes back the matched campaigns to the respective trading partners. The traders can either accept or make a counter-offer; thus the marketplace fetches the best price for buyers on their procurement and achieves the best rate for suppliers who need cash. When offers are not matched, that is, when excess funding is needed, the marketplace also connects the buyers and suppliers to potential lenders.
Only each supplier-buyer partner can view the buy/sell campaign, hence the exchange is absolutely confidential. JEDTrade’s robust platform eliminates the resource-intensive manual process of connecting with each of your suppliers/buyers to negotiate for discounts or early payments. JEDTrade’s marketplace has automated the process therefore transparency, analytics and control are improved within the users’ organisations. These benefits are on top of users being able to enjoy smoother cash flow, cost savings and profitability.
The digital marketplace is powered by smart data that collates and performs extensive analytics backed by intuitive algorithms – this generates optimal cost-benefit outcomes that are routed to the trading partners for decision-making.
The participating traders are not required to make any changes to the payment or invoicing process, which are done directly by transacting parties. If need be, the marketplace can be integrated into various accounting and ERP software. Bilateral trade relationships are visible and accessible only to each supplier-buyer pair and the service is delivered via a secure and trusted cloud service.
Benefits of Trade Marketplace Solution
- Customisable, affordable, flexible and scalable
- Improved interactions and meaningful engagements based on data analytics, enhancing relationship with trade partners
- Traders are empowered with robust analysis to make well-informed decisions that facilitate optimised trade, resulting in cost savings and improved cashflow
- Real time optimisation hence almost instant liquidity is ensured across the supply chain, thus improving the stability of all participants in the chain
- Network of lenders provides access to additional alternative funding options – working capital term loan, factoring, credit line etc
- No resistance as trade partners are not required to onboard with JEDTrade to participate in GoJED campaigns
- JEDTrade is borderless. As long as overseas suppliers/buyers have access to an internet connection and their emails, they will be able to participate in GoJED campaigns
Benefits as a Supplier
Suppliers would benefit from the liquidity released by upfront payment and enjoy improved cashflow efficiency and save on financing costs. Their exposure to credit risk is reduced and balance sheet metrics improved.
Suppliers will be able to advance cashflow in the most efficient and organised manner, especially for industries that typically sell to a large network of downline distributors, resellers and end buyers (i.e. wholesale distribution of food, electronics/IT, industrial goods and general trading).
Sample Supplier Scenario
Mr Wong* is a wholesaler of poultry and has a downline network of more than 1000 distributors and end buyers that include supermarkets and F&B outlets. At any point in time, his outstanding receivables are $2m with an average 60-90 days life cycle. Through JEDTrade’s Supplier module, he is able to find the easiest way to advance cashflow from his trade buyers at e.g. 2% discount, as long as it is cheaper and faster than borrowing from the bank. At the same time, he is able to provide savings to his buyers for making early payment.
Benefits as a Buyer
Buyers would benefit from the savings through discounted purchase and enjoy improved gross margin, profitability and EBITA.
Buyers will be able to earn better returns on their available cash by setting their desired discount yield in return for early payment on their selected payables. As a result, sustainable supply chains are created and smaller suppliers who need to advance cashflow can now be supported with an early payment option received from their buyers.
Sample Buyer Scenario
Raelyn Group* is a hotel chain that uses JEDTrade for its Buyer module. At different times of the month, the Group may sit on excess cash positions of $1m. Through JEDTrade, it is able to earn returns of 5% p.a. by offering early payment to its upline network of 500 suppliers, who may wish to be paid early in return for giving Raelyn its target discount. In this way, Raelyn is able to earn higher returns of 5% p.a. vs a fixed deposit placement that earns less than 1% p.a. Its smaller suppliers can also choose to be paid early if cashflow is the key motivation at that point in time.
JEDTrade is a digital trade platform that connects suppliers, buyers and lenders to make trade and working capital flow more efficiently for businesses. The platform is built on smart data architecture to facilitate dynamic trading mechanisms between trade partners that are leveraged on open account credit terms. The objective is to help businesses find and unlock financial value from their organic supply chains, which is the easiest and most direct avenue to optimise trade and cashflow for the business.
In terms of productivity, JEDTrade’s technology is able to collate and generate optimal cost-benefit outcomes for large trade networks that cannot be organised efficiently or analysed meaningfully via a manual process. If additional working capital is required, JEDTrade also helps connect with partner lenders to expand these options for users.
Enhance your trading relationships and achieve win-win outcomes between buyers and suppliers.
With our intuitive, secure and dynamic Trade Marketplace solution (powered by JEDTrade), workflow capital management can be made effortless, and your company’s financial health rosy.