Impact Case Study – Portfolio Receivables Purchase through CredAble’s DFX Platform

DFX Impact Case Study

Client’s Supply Chain Snapshot

Our client is a leading global multinational agricultural giant. The client has several exclusive dealers and distributors for which it wishes to extend working capital coverage while simultaneously securing its own receivables.

Problem Statement

  • Dealers have credit periods of 30-40 days, but typically do not pay on time, withholding payment from anywhere between 60 to 90 days
  • To discourage late payment, dealers are given the option to pay early in exchange for a cash discount, which eats into the client’s margins
  • Sales returns by dealers are common, which meant a regular channel finance structure could not be implemented
  • Technical accounting for returns, rebates and other reversals required a customized, bespoke solution specifically designed to cater to the client’s needs

CredAble Solution

  • CredAble was able to structure a Portfolio Receivables Purchase structure for the dealers of the client
  • Program backed by a multinational bank (one of several partners in CredAble’s financial institution network)
  • Using CredAble’s platform dynamic, the client was able to re-negotiate extended credit periods for its dealers, while securing its receivables from the bank
  • CredAble’s technology was able to map the entire payment cycle, accounting for rebates, sale returns and other accounting entries, to provide the client along with the bank visibility on the fund flow through customized reports as per requested formats
  • Flexible repayment module customized to enable dealers to pay ahead of due date if required, along with making lumpsum payments against dues, that were monitored and tracked by CredAble’s platform
  • Client was also given a flexible repayment mechanism, whereby it could utilize CredAble’s escrow account setup or receive payment directly into its designated account
  • Customised dashboards created as per the client’s requirement to provide visibility on dealer behaviour, limits, etc
  • Arbitrage savings created for the client by way of differential pricing between the dealers’ interest rates and the bank program-level rate of interest

Impact Created

  • Program coverage of ~75% across core dealers of the client
  • Contracted credit period for dealers increased from 30 days to 150 days
  • Average effective credit periods for dealers increased from 60 days to 120 days
  • Reduction in DSO for client from 60 days to 2-5 days
  • EBITDA savings of 3.6% – 5.4% witnessed for the client on a monthly basis