What Is Financial Supply Chain Management?

Financial supply chain management is the financial management tools and techniques a business uses from the time the products or services are produced up until the business is paid for the goods or services. Essentially, financial supply chain management controls the payment for the goods, products or services the company sells to cover its expenses, be profitable and increase its bottom line.

Financial supply chain management requires the business to evaluate each step of the process from the time the product or good is produced. Recognizing that there is a relationship between each of the steps from the time of production to the time of payment allows businesses to manage its supply chain in the most efficient and effective manner. For example, when a buyer of the goods or products does not pay within the 30 day period the company allows, this affects the amount of working capital the company has to pay its expenses, buy the materials to produce more products and cover any other expenses the business may have.

Evaluating what the financial supply chain management is for the business allows the managers or the owners to determine ways to better manage the supply chain. Essentially, this means producing and selling more goods, while shortening the time from sales to payment from its clients. Financial supply chain management also includes cutting out or adding steps to the process that simultaneously shortens the time period from the sale to the payment step of the process.

The financial supply chain works on the other side of the business, which is the pre-production period. The business should evaluate the suppliers it is buying its raw materials from or any goods it needs to produce the products the business sells. If there are ways to cut costs or shorten delivery time of the raw materials to the business producing the products, this too involves the financial supply chain management of the business.

If the business can cut costs or shorten time periods on the front end, then the business can also control the costs and time during production. For example, if the business receives the raw materials it needs to produce its product faster or in greater quantities, then it can sell the products faster too. These items may sit in inventory so that there is no delay in shipping when an order is received, or production begins as soon as an order is received. All of this eventually leads to better management of delivering produced goods to the end users and collecting the payments from these buyers.