Unlocking Capital Stuck in Accounts Receivable through Netting!

DATE: 16 FEBRUARY 2022
AUTHOR: RUDY BANHOLZER, CCO – TROC CIRCLE

14 trillion USD of capital is stuck in today’s inefficient Accounts Receivable (AR) and Accounts Payable (AP) supply chain causing a financial gridlock. 

Most businesses are impacted by the time it takes to collect their receivables, but small and medium enterprises are suffering most as it is more difficult and relatively more expensive for them to access bridge financing solutions.

What if we could resolve or at least reduce this financial gridlock? 

Netting or offsetting AR and AP in an open platform could be the solution.

Imagine you are the owner of a manufacturing plant. To build your product, you need components from Supplier X and once your product is ready you will sell it to Client Y, potentially for further processing. This represents a simple supply chain. 

In today’s world, it will take you time to collect your money from Client Y and hence time to pay Supplier X. Also, it is more than likely that Supplier X and Client Y do business together. 

Why not review how much each party owes the other two and simply cancel common amounts? 

In the best-case scenario this could avoid having to transfer money altogether and in the worst-case scenario this could reduce the number of transfers and their amount. 

You would have to spend less time and effort with collecting your receivables and processing your payables and you would have more cash at hand to further build your manufacturing plant.

The questions that come to mind are: 

  • What if the supply chain is longer and more complex? 
  • What if all the parties in the supply chain are not connected? 
  • Who will process the data and how?

It is exactly because of these questions that so far netting has been done manually and usually between two parties, hence limiting its potential. 

The exception is the financial industry using an interbank netting system tremendously facilitating the payment velocity between each other.

With the technology available today, the above questions and all the others that you can think of can be answered and netting can be done on a global open platform in an easy, non-intrusive, automated, fast, and secure way. 

Trials show that half of the AR and AP of global corporations can be netted, leading to cost savings of above 15% and more cash in hand to re-invest and grow the business. 

Not only that, less time and resources would have to be spent on collecting receivables and processing payables, foreign exchange fees and transaction fees would be removed when doing business internationally and the need for expensive bridge financing solutions would be reduced. 

Talking about bridge financing solutions, these could be offered on the same platform, through various partners, for those invoices that cannot be netted out.

An open netting platform can truly enable businesses to unlock capital stuck in their accounts receivable and contribute to the reduction of the financial gridlock we mentioned at the start.

If you are interested to know more and join the Global Netting Platform, feel free to reach out.

Rudy Banholzer | CCO at Troc Circle | www.troccircle.com | rudy@troccircle.com

Rudy Banholzer is Entrepreneur / intrapreneur at heart who thrives to get the best out of the people he works with and has 15+ years experience across digital marketing, business development, building and investing in startups / scaleups, raising capital, overseeing company sales transactions and managing corporate integrations across the EMEA region.