The role of treasury in supply chain finance (SCF)
This article is written by Liquiditas The treasury function plays a central role in supply chain finance (SCF), particularly in reverse factoring programmes, because it is responsible for managing liquidity, financial risk, and funding strategy across the organisation. As supply chains become more complex and capital markets more volatile, treasury’s involvement in SCF has evolved from a supporting role into a strategic control function. Modern treasury teams are no longer focused solely on cash execution. They act as gatekeepers of financial stability, ensuring that SCF programmes align with the company’s liquidity position, risk appetite, accounting treatment, and long-term financial objectives. When designed and governed properly, SCF can strengthen working capital management and supply chain resilience. When poorly managed, it can introduce hidden risk. The role of treasury in managing liquidity and financial risks At its core, treasury is responsible for ensuring that the organisation has sufficient liquidity to meet operational obligations, including payments to suppliers and funding for growth initiatives. In the context of supply chain finance, this responsibility becomes more complex. Treasury monitors short-term cash positions while also managing long-term funding structures. This includes assessing how SCF programmes affect cash availability, payment timing, and liquidity buffers under different market conditions. Effective treasury oversight ensures that early payment solutions for suppliers do not compromise the organisation’s own financial flexibility. In addition to liquidity, treasury manages key financial risks that directly influence SCF performance, including: Through hedging strategies, diversification of funding sources, and continuous monitoring, treasury protects the organisation from financial volatility that could destabilise the supply chain. How the role of treasury can optimise working capital through SCF One of treasury’s most important responsibilities in SCF is working capital optimisation. Supply chain finance allows treasury to improve cash flow efficiency by better aligning payment terms, funding costs, and supplier liquidity needs. Treasury-led SCF initiatives may include tools such as reverse factoring and dynamic discounting, which enable suppliers to access early payment while allowing the buyer to preserve or strategically manage its own cash position. When implemented carefully, these structures can free up capital for investment without increasing operational risk. However, treasury must balance optimisation with discipline. Extending payment terms or expanding SCF programmes without considering supplier impact, disclosure requirements, or funding concentration can create long-term vulnerabilities. Treasury’s role is to ensure that working capital improvements are sustainable, transparent, and aligned with enterprise risk management. Key treasury activities in SCF Within an SCF framework, treasury is responsible for several critical activities that support both financial stability and supply chain continuity. Funding: securing and managing capital for SCF programmes Treasury is responsible for ensuring that sufficient funding is available to support SCF programmes. This involves determining the optimal mix of internal liquidity and external financing, such as bank facilities or capital market instruments. Treasury evaluates funding costs, maturity profiles, and counterparty exposure to ensure that SCF programmes remain cost-effective and resilient under changing market conditions. Ongoing monitoring of financial markets and internal performance allows treasury to adjust funding strategies proactively. By maintaining a robust and diversified funding structure, treasury ensures that suppliers can be paid reliably while protecting the organisation from overreliance on any single funding source. Risk management: assessing and mitigating SCF-related risks Risk management is one of the most critical aspects of treasury’s role in supply chain finance. Treasury must identify, assess, and manage a range of risks associated with SCF, including: Treasury establishes risk limits, monitoring frameworks, and escalation procedures to ensure that risks remain within the organisation’s tolerance. Importantly, treasury must also decide when to slow, restructure, or exit SCF programmes if risks outweigh benefits. Cash flow forecasting and scenario planning Accurate cash flow forecasting is essential for effective SCF management. Treasury uses historical data, current cash positions, and forward-looking assumptions to anticipate funding needs and liquidity pressures. Beyond baseline forecasts, modern treasury functions increasingly rely on scenario analysis and stress testing. These tools help assess how SCF programmes perform under adverse conditions, such as supplier distress, market volatility, or reduced access to funding. This forward-looking approach allows treasury to make informed decisions and maintain financial resilience. Governance, transparency, and accountability In recent years, supply chain finance has come under increased scrutiny from auditors, regulators, and investors. As a result, treasury plays a critical role in ensuring that SCF programmes are governed transparently and aligned with accounting and disclosure standards. Treasury is typically responsible for: Strong governance protects the organisation from regulatory and reputational risk and reinforces treasury’s role as a trusted financial steward. Benefits of treasury-led SCF programmes When treasury is actively involved, supply chain finance can deliver meaningful benefits across the organisation. Enhanced financial stability and liquidity Treasury oversight ensures that SCF programmes support liquidity objectives without undermining financial resilience. By optimising funding costs and maintaining adequate buffers, treasury helps the organisation withstand market uncertainty. Stronger supplier relationships Reliable and timely payments improve supplier confidence and stability. Treasury-led SCF programmes support healthier supplier ecosystems, which in turn reduce operational risk. Greater operational efficiency Integrating treasury processes with SCF platforms improves visibility, coordination, and decision-making across finance and supply chain functions. Real-time data enables faster responses to disruptions and changing conditions. Greater operational efficiency through integration Integrating treasury operations with SCF systems allows financial decisions to be made with a comprehensive view of supply chain dynamics. This integration supports better prioritisation of payments, funding allocation, and investment decisions. With access to real-time financial data and analytics, treasury can respond more quickly to market changes, supplier needs, or liquidity pressures. This agility is increasingly critical in volatile economic environments. Final thoughts The role of treasury in supply chain finance has expanded significantly. No longer limited to cash execution and funding, treasury now serves as the strategic owner of liquidity, risk, and governance within SCF programmes. By optimising working capital, managing financial risk, and ensuring transparency, treasury enables supply chain finance to support operational resilience rather than introduce hidden vulnerabilities. In an environment of heightened scrutiny and uncertainty, an active and integrated treasury function is essential to ensuring that supply chain finance contributes to long-term stability and success. Join our…
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10 supplier management best practices and strategies
This article is written by our partner, SAP Taulia Supplier management is the term used to describe the processes of selecting and managing suppliers or vendors. It’s a hugely important element of operations for most companies, having a significant impact on costs, manufacturing, and cash flow. Getting the best performance from your suppliers, while also ensuring you’re contributing towards a stable long-term relationship, can pay off in meaningful ways. Knowing how to manage suppliers effectively is therefore of great importance. Supplier management is a multi-step process. Each stage can be optimized to unlock efficiencies that not only improve supply chain performance, but also strengthen overall operational health. These steps can generally be defined as: With poor supplier management processes, your business can face disruption due to late delivery, poor quality goods, inaccurate billing, data breaches, regulatory issues, and commercial and reputational risks. By adopting effective supplier management best practices, you can avoid these pitfalls and enjoy more robust relationships with suppliers. This can lead to greater supplier loyalty, better product quality, and lower costs. The following supplier management best practices and strategies can help you optimize your supplier management processes and get closer to achieving your business goals: 1. Set strategic objectives and establish KPIs Your supplier management objectives should be informed by business needs, with key considerations likely to include cost, supply chain efficiency and resilience. By using supplier key performance indicators (KPIs), you can gain valuable insights into how well your suppliers perform. Common KPIs include: 2. Adopt a centralized supplier management database A centralized and digitized supplier management tool is essential for businesses with complex and extensive supply chains. This can be facilitated by supplier information management (SIM) or supplier relationship management (SRM) solutions. SIM is a system or a set of processes that companies can use to capture, store, and analyze supplier data, thereby reducing the administrative burden and increasing the accuracy of data capture. SRM encompasses the processes a business can use to manage its suppliers and develop more productive relationships. 3. Improve your supplier risk assessment process Your supplier base can pose a range of significant risks to your business, such as the following: As such, it’s vital to assess supplier risk carefully during the supplier selection process and on an ongoing basis. By employing a suitable risk assessment process – and carrying out risk assessments regularly – you can guard against the possibility of future harm. 4. Strengthen your supplier onboarding process During supplier onboarding, it’s important that you obtain various information and documentation to complete all necessary compliance and risk assessments and register the supplier on internal systems. The supplier onboarding process should be as seamless and efficient as possible, as a positive experience can lay the foundations for a strong future relationship. In practice, however, onboarding is often labor-intensive and time-consuming. Onboarding best practices include automating wherever possible, maintaining a consistent approach and ensuring that supplier data is secure against breaches. 5. Segment your suppliers Placing suppliers into different segments or categories according to their importance to the business is one way you can improve your supplier management strategy. By identifying and prioritizing the most important suppliers, you’re able to focus on and strengthen those relationships that are most critical to the resilience of your supply chain. This has significant potential benefits for the overall success of your business in the long run. 6. Integrate automation and self-service By using SIM and SRM software to drive automation, you can achieve a range of efficiencies and cost savings, such as managing contracts in a single location, automating the onboarding process, and monitoring supplier performance in an automated way. Additionally, by offering suppliers self-service options, you may be able to delegate the task of inputting data – thereby reducing overheads and ensuring that supplier records are accurate, complete and up to date. 7. Streamline communication channels Clear and open communication channels are vital to building strong and lasting relationships with suppliers and ensuring supply chain resilience. You can take advantage of various tools to improve your communication with suppliers, including direct messaging and document-sharing tools. Taulia Collaborate, for example, allows suppliers to check on the status of invoices, with queries automatically associated with the relevant purchase order, invoice, or payment document. With conversations tracked in a systematic and centralized way, you can resolve issues with suppliers quickly and easily. 8. Assess supplier performance regularly Your business is directly linked to the performance of its suppliers. As noted above, you can use KPIs to monitor supplier performance against specific criteria and identify any cases where suppliers may be failing to meet agreed standards. If suppliers fall short of their performance targets, an assessment will need to be carried out. If the relationship is strong, it is more likely that poor performance can be tackled successfully. However, if suppliers continue to fall short of their performance targets, you may wish to renegotiate the contract or escalate the issue. 9. Prioritize strong supplier relationships Poor supplier relationship management can lead to poor communication, the breakdown of mutual trust and a mismatch of priorities, which can lead to difficult negotiations, the risk of a communication breakdown, and possible supply issues. Conversely, by prioritizing long-term supplier relationships – for example, by taking advantage of a sophisticated SRM system – you can improve operational efficiency and your supply chain resilience. 10. Formulate supplier management contingency plans Even the best-laid supplier management strategies can fail – so it’s important to anticipate potential disruption by having effective contingency plans. This may include detailing contingency suppliers that could be called upon to protect your business from supplier failure, together with key contacts and possible lead times. With proactive planning, you’ll be better able to protect your business from the consequences of supplier failure. Also Read Join our Treasury Community Treasury Mastermind is a community of professionals working in treasury management or those interested in learning more about various topics related to treasury management, including cash management, foreign exchange management, and payments. To register and connect with Treasury professionals, click [HERE] or fill…