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RBS has been selected as the funding provider for Sainsbury’s Trading Finance Platform (TFP), an internet-based payment management system, developed by PrimeRevenue, which was installed in 2007 to provide suppliers with online access to account information and benefit from early payments.

The funding agreement means that all registered suppliers can opt to receive early cash settlement of their invoices by selling them to RBS. For Sainsbury’s, the move has enabled it to support the cash flow needs of its core suppliers, while minimising the risk of supply chain disruption.

“RBS was pleased to be able to support the initiative at this point in time as we believe a healthy relationship between buyers and suppliers is fundamental to restoring the health of the retail economy,” says Andrew Betts, global head, trade finance and supply chain, RBS.

“The TFP is seen as a means of reducing liquidity risk within the supply chain and enhancing the company’s commercial relationships with its key suppliers. The company’s payment processes are largely unaffected by the existence and operation of the TFP.”

Once Sainsbury’s approves invoices received from registered suppliers, details are uploaded onto the PrimeRevenue system for viewing. Suppliers can then elect to sell some, or all, of their invoices to RBS for early settlement.

“Once the invoices are sold, the supplier receives funds equivalent to the face value of their value less the cost of early settlement, on the following business day,” explains Betts.
“Should a supplier decide not to sell the invoice, funds are received as normal, on the invoice due date.”

The cost of early settlement is based on prevailing money market interest rates, Sainsbury’s credit rating and the number of days outstanding until invoice maturity date.
Since its launch at Sainsbury’s, the TFP has provided suppliers with an online view of their trading accounts including invoices, debit notes, remittance advices, as well as advising them of payment dates.

Betts explains that suppliers can now derive additional business benefits, including a reliable source of competitively priced, off-balance sheet funding. They also benefit from improved visibility and control over their cashflows and access to an alterative source of funding – as and when they need it most.They can also improve their balance sheet position as use of the funding facility provided will positively impact their financial ratios.

“In addition, suppliers can see the process status in real-time within the TFP, giving them a complete view of their portfolio of transactions with Sainsbury’s on-demand,” adds Betts.

To date, the TFP has appealed most to well-established, mid-sized UK suppliers. However, large and small suppliers, based in the UK and abroad, have also registered on the platform.

“Since its launch in 2007, many of Sainsbury’s core domestic and international suppliers have signed up to the programme and are successfully accessing the portal on a daily basis.The expectation is that several hundreds of suppliers will join the RBS funded programme from now on,” says Betts.

He adds that registered suppliers have been asked to visit an online portal to ensure the transition of their details to RBS.

System integration between RBS and the PrimeRevenue designed TFP solution was relatively simple, according to Betts, who explains that it involved providing RBS with operational access to the PrimeRevenue system via a secure web-based portal.

Data is downloaded from the TFP at the end of every day and sent to RBS for reconciliation. RBS then uses Access Direct, its global payments and reporting engine, to send supplier payment data and effect the payments. The payments solution enables the transmission of cross-border commercial payment instructions in domestic and other currencies in a single file.

“RBS offers a full range of SCF facilities including supplier finance to over 100 corporate clients in 30 countries worldwide. Our philosophy is to work to deliver the most appropriate solution to meet our clients’ needs, which in the majority of cases uses our own MaxTrad proprietary system, although clearly we do work with other third-party providers,” explains Betts. “This flexibility means that companies can integrate our supply chain finance programmes seamlessly into their existing front and back office systems, with minimal disruption to their business processes.”

Sainsbury’s believes that the recent agreement will make using the TFP more attractive for its existing suppliers.

“Since the launch of our TFP in 2007, we have witnessed a significant increase in the number of suppliers utilising the platform to better manage their cash flow,” says Darren Shapland, chief financial officer at Sainsbury’s. “We are delighted that RBS, a key relationship bank, has agreed to provide funding for the programme going forward. We believe RBS’s participation offers considerable scope to grow the programme and further improve liquidity throughout our supply chain.”