Supply chain financing system and method

A method for financing a supply of goods (a supply chain) from a supplier to a buyer in which the buyer has a lower cost of funds than the supplier. According to the method, the buyer generates a purchase order for the goods which is forwarded to the supplier who in turn ships the goods to the buyer. The supplier sends an invoice to the buyer which stores the invoice data in a database. The financing institution electronically accesses the database to retrieve the daily invoices. The financial institution then calculates the financing applicable to the shipped good and forwards a payment to the supplier. Upon maturity of the financing, the buyer settles with the financial institution by remitting the gross proceeds.

FIELD OF THE INVENTION 
The present invention relates to financing systems and methods and more 
particularly to a system and method for financing a supply of goods in a 
supply chain. 
BACKGROUND OF THE INVENTION 
Historically, working capital financing had been a one transaction process 
(from vendor to buyer, or supplier to customer) and usually involved only 
a single balance sheet or asset class. This method of capital financing is 
explained in connection with FIG. 1. FIG. 1 illustrates a traditional 
vertically integrated manufacturing processes. Raw materials 10 from a 
supplier were delivered to a factory 20 which produced finished goods 30 
from the raw materials 10. From a financier's point of view, the only risk 
it had to understand was whether the manufacturer 20 could profitably 
transform the raw materials 10 into finished goods 30 that consumers 
wanted to and could afford to buy. Furthermore, this model only involves 
financing a single entity, the manufacturer 20. 
In today's global economy, an intricate web of interdependent players make 
up the international supply system, requiring more sophisticated methods 
of coordination and finance. This complexity challenges the current 
methods and assumptions, making it more difficult for the financier to 
gauge the risk involved. 
Furthermore, in the conventional supply chain financing, individual 
decisions are made at the enterprise level regarding the working capital 
finance structure to support operations. Each company in the supply chain 
has varying degrees of incentives to pay late and collect funds early, and 
to push as much inventory onto the balance sheets of its counterparties. 
A combination of three emerging technologies has enabled the development of 
the present invention and its application to supply chain financing. These 
technologies are Supply Chain Management (SCM) techniques, electronic 
commerce (EC), and financial market technology. SCM has been defined as 
the management of flows, including materials, information, and money. 
Before SCM techniques were introduced, the size of buffer stocks 
maintained by a manufacturer or supplier were large, and even then, these 
buffer stocks often could not accommodate the peak seasonal requirements 
of customers. The introduction of SCM has smoothed out material flows, and 
this in itself has reduced the working capital expense associated with the 
high inventories of yesterday. 
The second enabling technology that supports the development of the present 
invention is the transformation of electronic commerce (EC). While EC has 
been used for many years, start-up costs have been quite high, and many 
potential applications have therefore been excluded. With the development 
of company intranets and browser-based applications, new uses of business 
to business electronic commerce are burgeoning. Savvy financial 
institutions (e.g., banks) are migrating their information-based products 
from proprietary in-house developed software to browser-based intranet 
applications. Accordingly, these savvy institutions are now positioned to 
access their clients'supply chain data from their clients'electronic 
commerce and enterprise resource planning (ERP) systems in order to 
provide financing based on those data. 
The third factor that permits the optimization of the present invention is 
the growth of investor appetite for securities linked to specific cash 
flows. This form of investment is distinct from investments in securities 
linked to the risks and rewards of companies themselves, such as equity 
and debt securities. 
In light of the problems associated with the conventional methods of supply 
chain financing, and in view of the emergence of the above described 
enabling technologies, it is an object of the present invention to reduce 
the finance costs associated with the supply chain and to free the 
movement of goods across the balance sheets of supply chain partners. 
SUMMARY OF THE INVENTION 
The present invention, Supply Chain Finance (SCF), can be most easily 
thought of as "just in time money". It is the financial equivalent of 
materials planning "just in time" (JIT) and its benefits are very similar. 
Like JIT, the present invention seeks to eliminate inefficiencies that 
arise when trading partners do not coordinate their demand requirements. 
In many cases, a supplier's cost of funds is greater than its buyer's cost 
of funds. The present invention enables the provision of financing to a 
supplier at the buyer's lower finance cost. The cost savings can be used 
to extend the buyer's days payable outstanding, resulting in an 
improvement in its Shareholder Value Added (SVA). In contrast to the prior 
art financial technique of factoring, the financing of the present 
invention is usually mandated by and arranged in conjunction with 
buyer--not the seller. 
Furthermore, the financing of the present invention can be arranged without 
recourse to the seller, enabling off-balance sheet treatment for the 
seller. Thus, the SVA for both entities can be improved and the financing 
takes place at the lowest possible cost for both parties. 
As described above, SCM techniques have been developed to coordinate 
complex supply chain interrelationships. However, one hidden cost of many 
SCM techniques has been to place greater reliance on suppliers to hold 
inventory. Many suppliers of United States companies, particularly those 
located in emerging market countries, have higher cost of funds than do 
their U.S. customers. The present invention eliminates this inefficiency 
by ensuring that the capital cost associated with the asset conversion 
cycle of any given supply chain is the lowest possible. 
The present invention takes advantage of the new availability of low cost 
electronic commerce links between buyers and their financial institutions. 
These links are used by the institution to access the data contained in 
the buyer's enterprise resource planning (ERP) systems. With this data in 
hand, the institutions are able to evaluate, develop and offer highly 
structured financial products tailored to the clients'dynamic supply chain 
capital requirements.

DETAILED DESCRIPTION OF THE INVENTION 
One application of the present invention is Accounts Payable (AP) Financing 
which is illustrated in FIG. 2. As illustrated in this Figure, there are 
three entities involved in the essential features of the supply chain 
financing of the present invention, the supplier or vendor 210, the buyer 
220 and the financial institution or advisor 230. In a preferred 
embodiment of the present invention, the financial institution 230 is a 
bank and the buyer 22 is a client of the bank. 
Prior to actually implementing the present invention, the parties involved 
must evaluate the potential saving which can be expected from using the 
Supply Chain Financing of the present invention. This evaluation process 
typically begins with the buyer 220 hiring the financial advisor 230. The 
financial institution 230 uses the Trade Cycle Map (FIG. 4) the Supply 
Chain Financing Formula (described below) and data provided by the buyer 
220 to determine whether the potential savings justify expense of 
proceeding. 
The financial advisor 230 reviews the electronic commerce infrastructure 
among the buyer 220 and its trading partners 210. Although only a single 
trading partner 210 has been depicted in FIG. 2, the present invention is 
clearly applicable to multiple trading partners 210 of a buyer 220. In 
fact, once the setup for the present invention described below has been 
completed, the buyer will actually experience increased savings with the 
expansion of the supply chain financing to additional trading partners 
210. 
If the above evaluation determines that there is sufficient financial 
benefit, the bank 230 makes recommendations on the structure and 
implementation approach, taking into account the client's 220 
relationships with its trading partners 210 and the client's other 
non-financial objectives. The financial advisor 230 conducts interviews 
with the trading partners 210 in order to validate the supply chain 
assumptions used above in the application of the Supply Chain Savings 
Formula and to understand other non-financial objectives and business 
values which may impact the implementation of the present invention. If 
the results of the interviews are all favorable, and the parties agree to 
proceed, there are several technical, administrative and legal processes 
which must be established. 
The following set-up procedures are applicable to "true" Accounts Payable 
Financing in which the buyer accepts responsibility for the payment of the 
underlying merchandise. The buyer 220 in conjunction with the financial 
advisor 230 determine the advance financing rates which are applicable for 
each of the participating vendors 210. The applicable advance rates for 
each of the vendors 210 will vary depending of the particular 
circumstances of the vendor 210 and the relationship between the vendor 
210 and the buyer 220. A vendor profile is then established for each 
vendor 210. The vendor profile includes, for example, the payment terms 
and advance rates established for the particular vendor. The vendor 
profile is used in the day-to-day processing involved in connection with 
the supply chain financing of the present invention. 
From a legal standpoint, an agreement must be reached between the financial 
institution 230 and the client 220. One key provision of the agreement 
includes establishing the rules by which the financial institution can 
identify when the client has accepted good from the supplier. Typically, 
the client 220 vouchers the supplier's invoice upon its acceptance of the 
goods. The rules established in the typical case would therefore indicate 
that a vouched invoice (or account payable) indicates that the buyer 220 
has accepted the goods and payment is due to the supplier 210. The rules 
would additionally set forth the manner in which the financial institution 
230 can properly identify vouchered invoices. In conjunction with the 
acceptance rules, the client 220 agrees to pay the financial institution 
230, acting on behalf of the seller 210, upon maturity of the underlying 
financing once the financial institution has acted upon a properly 
identified acceptance by the client 220 (e.g., a vouchered invoice). 
Additional provisions in the agreement between the client 220 and the 
financial institution 230 are: an agreement as to the method and form for 
resolving post acceptance disputes (usually in the form of a put to the 
client 220 of the underlying asset); and establishment of reliance on the 
selected method of communication (this will typically place no liability 
on the part of financial advisor 230 to advance funds in the event of 
communications/software failure). 
Having resolved the legal issues, the process turns to addressing the 
technical issues of implementing the present invention. The main technical 
requirement of the present invention is the establishment by the financial 
institution 230 and the client 220 of extra/intra/internet dial-up and 
logon access by the bank 230 to the client's 220 electronic commerce and 
enterprise resource planning (ERP) systems such as the client's account 
payable system. In general, most buyers 220 will already have electronic 
accounting and management systems in place and the above process is merely 
a matter of providing electronic access to these systems by the financial 
institution 230. Of course, all of the appropriate security measures for 
the provision of this access (e.g., passwords . . . ) should be put in 
place. 
Once all of the above described evaluation and setup has been completed, 
the parties are ready for the actual implementation of the financing. In 
the Accounts Payable example depicted in FIG. 2, the buyer 220 desires to 
purchase goods from the supplier 210. To initiate the purchase, the buyer 
issues a request for goods, e.g., a Purchase Order (PO) in step 235 of the 
process. In a preferred embodiment, the PO 235 is issued from the buyer 
220 to the supplier 210 through an electronic link 240 such as the 
internet or other electronic data interface. Alternatively, the PO 235 can 
be issued through traditional mail, voice or facsimile channels, although 
these methods will inherently slow the process, be less reliable and less 
conducive to tracking and verification. Regardless of the method of 
transmittal of the PO 235, the buyer 220 updates its ERP system to reflect 
the issuance and terms of the PO 235. 
In response to its receipt of the PO 235, the supplier 210 ships 245 the 
goods to the buyer 220 in anticipation of being paid (to be discussed 
below). In conjunction with shipping 245 the goods, the supplier 210 also 
transmits 250 invoice data to the buyer 220. Again, in a preferred 
embodiment, the invoice is sent 250 to the buyer 220 over the electronic 
link 240, but can be transmitted manually (by mail, voice or facsimile). 
Alternatively, the shipment 245 of the goods (transfer of title/risk) can 
be established through the buyer's 220 receipt of the goods at one of its 
facilities (e.g, through dock or warehouse receipts). 
Regardless of the method by which the shipment 245 of the goods is 
verified, the buyer 220 updates its ERP system to reflect the receipt of 
the goods. The buyer 220 then matches the delivery/invoice data to the PO 
data corresponding to the delivery. If the acknowledgement data does not 
meet the buyer's 220 payment rules, then adjudication is required between 
the client 220 and the vendor 210 in order to determine the value, if any, 
of shipped goods which are eligible for financing. If the acknowledgement 
data meets the client's 220 payment rules, then the buyer 220 may deduct 
any credits due the buyer 220. Once the validity of the invoice data has 
been established, the buyer 220 indicates its acceptance of the goods in 
accordance the manner established by the rules between the buyer 220 and 
the financial institution 230. In the preferred embodiment of the present 
invention, the buyer 220 vouchers the account payable (AP) in its ERP 
system. The voucher must include the payment aging of the individual 
payment for the particular shipment in question. 
In an additional embodiment of the present invention, the financial 
institution 230 itself performs the back office operation of vouchering 
the accounts payable for the client 220. In this embodiment, the financial 
institution 230 has access to the Purchase Order data and the systems used 
by the client 220 normally used to verify the acceptance of the goods 
(e.g., reports detailing the physical inspection, quantity, quality . . . 
of the received goods). In this embodiment, the agreement between the 
client 220 and the financial institution must carefully delineate the 
rules governing the process which the financial institution 230 must 
follow in accepting the goods. This is critical, because, as described 
below, the acceptance of the goods is the trigger for the financial 
institution to calculate the financing applicable to the goods and for the 
forwarding of payment to the supplier. 
Returning to the normal AP financing processing, once the verified and 
vouchered AP has been updated in the client's 220 ERP system, the bank 230 
is able to log onto the client's 220 intra/internet server and extract 260 
a file containing the daily AP vouchers. In processing the AP vouchers, 
the financial institution 230 first discards vouchered AP's that do not 
match established vendor profiles (i.e., vendor for whom supply chain 
financing has not been set up). The bank 230 then maps vouchered AP's 
against the vendor profile associated with the vendor 210 which shipped 
the goods reflected by the vouchered AP. Using the vendor profile, the 
financial institution 230 calculates the advance rate applicable to 
financing of the particular transaction. The bank 230 then performs a 
discount to yield calculation with respect to the value date to maturity 
based on the advance rate data. This calculation yields the net proceeds 
which the bank 230 will pay to the supplier 210. The bank 230 then 
calculates a payment fee (if any), creates an electronic payment file for 
the net proceeds less payment fee (if any), and sends the payment file to 
the bank's 230 payment system. 
Once the payment file has been created, the bank 230 sends 270 a payment 
notice to the buyer 220. The payment notice includes the client's 220 
reference data (typically the PO number). Upon receipt of the payment 
notice, the buyer 220 confirms the payment(s) and maturities. In the event 
there is a discrepancy between the client's 220 AP/ERP system and the 
bank's 230 payment notice, manual resolution of difference is required. 
Upon approval of the payment notice and/or resolution of any 
discrepancies, the bank 230 pays 280 the supplier 210. Alternatively, the 
bank 230 can pay the supplier 210 simultaneously with its notification to 
the buyer 220. In this embodiment, the above described agreement between 
the buyer 220 and the bank 230 governs any dispute as to discrepancies 
with respect to the payment made by the bank 230 to the supplier 210. In a 
preferred embodiment, the payment 280 to the supplier 210 is accomplished 
via Electronic Funds Transfer (EFT). 
To close the financing loop, on maturity (the agreeing date), the client 
220 remits 290 the gross proceeds to bank, which settles the transaction. 
The AP Financing described above in connection with FIG. 2 can work well to 
improve a buyer's 220 SVA by carefully matching the interest cost savings 
generated to create additional days payable outstanding for the buyer 220. 
On the other hand, it can be used more aggressively, as an incentive or 
quid pro quo for a supplier 210 to accept lower sales prices to its 
customer/buyer 220. The power of this relatively simple structure can be 
seen in FIG. 3. 
The chart depicted in FIG. 3 shows the number of additional days 
outstanding (and their dollar value at the current LIBOR rate) based on 
the number of basis points (a basis point is 1/100 of 1%) difference 
between the buyer's 220 and the seller's 210 cost of funds. LIBOR is the 
London Interbank Offer Rate, the most widely used rate for funding bank 
loans to large corporations which is currently about 5.625%. As an example 
of the use of the chart depicted in FIG. 3, if the buyer's 220 cost of 
funds is 200 basis points less than the seller's 210, and the current 
payment terms are 60 days, then through the AP structure of the present 
invention, the buyer 220 could receive an additional 21.8 days of terms 
from the seller 210 at no additional receivable carrying cost to the 
seller 210. 
The example of AP Financing given above has broad applications. By 
neutralizing the impact of working capital cost across the supply chain, 
it can encourage experimentation with various JIT initiatives. The example 
above shows how SCF of the present invention can help trading partners 
create more flexible payment arrangements to meet SVA goals. Other SCF 
structures can help managers optimize the physical location of materials 
without imposing a financing penalty on one partner. Other structures can 
facilitate the funding of overseas partners facing dramatically higher 
funding costs. 
One step in the process of the present invention briefly described above is 
evaluating whether the process will be financially beneficial. The first 
step in evaluating whether or not SCF would provide any benefit to a 
particular supply chain is to do a quick assessment of the net trade cycle 
of each individual company within the supply chain in order to determine 
the dollar value of the potential saving. A simple example of a Trade 
Cycle Map is shown in FIG. 4. In this case, the supply chain being mapped 
includes a primary supplier and a single customer, and takes into account 
the supplier's supplier and the customer's customer, the retail end-user. 
The Trade Cycle Map shows the assets attributed to the supply chain for 
each participant--inventory and accounts receivable. The payable period is 
the accounts receivable period of the supplier. The chart also shows the 
percentage of the Wholesale Value Chain, which is used as a factor in 
order to calculate the potential savings of SCF. The chart can be used to 
derive the net trade cycle of each participant and, more importantly, the 
supply chain as a whole. 
In this example, the Net Trade Cycle of the defined supply chain is 130 
days--the time from when "Supplier" pays "Supplier's Supplier" to the time 
when "Co." is paid by "Customer". Another way to express this is that the 
supply chain "turns" 2.8 times per year. It is observed that in this 
example "Supplier" bears the greatest burden of financing this particular 
supply chain, 90 of the 130 days or about 70%, whereas "Co." pays about 
30% and "Customer" has no direct finance cost, having matched the timing 
of its receivable with the payment of "Co's" invoice. 
The mismatched payment terms in this example are intended to portray the 
typical historical relationships between buyer and seller over time, and 
the relative power one has over the other. The challenge foremost to 
corporate treasurers is to ensure that a company's business mix reflects 
an overall balance of trading terms so that overall, payables fund much of 
inventory and some receivables, if possible. However, trade cycles do not 
get a great deal of attention at the supply chain level, especially if 
they are being managed well overall at the corporate of division level. 
As an illustration of the benefits of the present invention, the following 
assigns credit costs to each of the players in the example depicted in 
FIG. 4. Assume "Supplier", who is financing 90 out of the 130 net trade 
cycle days, is a Korean manufacturer. "Co." is a large middle market 
manufacturer and distribution company. And further assume that "Customer" 
is a leading consumer electronics retailer with a top credit rating. The 
marginal funding costs of each of these entities is as depicted in Table 
1. 
TABLE 1 
______________________________________ 
Company Marginal Funding Cost 
______________________________________ 
Korean Manufacturer 
LIBOR + 6.5% 
("Supplier") 
USA Middle Market Manufacturer 
LIBOR + 2.5% 
("Co.") 
Strong Retailer ("Customer") 
LIBOR + 0% 
______________________________________ 
The potential supply chain savings can be derived from the following Supply 
Chain Financing Formula: 
##EQU1## 
Where V is the dollar amount of annual wholesale value chain; n is number 
of participants, P is the percentage of annual value chain contributed by 
each participant; d is number of days each participant finances the value 
chain; t is net trade cycle of supply chain, .DELTA. is the LIBOR spread 
of each participant; and D is the LIBOR spread of lowest funding cost 
supply chain participant. 
If $100 million wholesale value is assigned to the example above, the total 
potential supply chain finance cost savings in this example is therefore 
$2,525,000 (2.5%). It is this amount that would be shared among the supply 
chain participants and the investors, according to the performance risks 
inherent in the transaction and how the financing would be structured. 
FIG. 5 illustrates an alternative embodiment of the present invention. 
Although this embodiment also uses the Account Payable as the trigger for 
the financing, in contrast to the previous embodiment, where the buyer 
assumed full risk, in the present embodiment the seller is advanced a 
payment prior to shipment of the goods and the buyer has recourse against 
the supplier for at least part of the advance. This embodiment is known as 
Vendor Financing. 
The evaluation process for Vendor Financing is the same as described above 
with respect to the AP Financing depicted in FIG. 2. The three entities 
depicted in FIG. 5, the buyer 220, the supplier 210 and the financial 
institution 230 are the same as those depicted in FIG. 2. The set-up 
process for Vendor Financing is slightly different from that described 
above. In determining the Advance rates which are applicable to the 
participating suppliers 210, the bank 230 will determine two Advance 
Rates, one for pre-shipment advances against Purchase Orders and one for 
post-shipment advances against Accounts Payable. Furthermore, the bank 230 
will determine the total amount of final credit that may be taken by the 
buyer 220 following shipment, against any single payment and a maximum 
dollar limitation for same. 
As with the AP financing described above, an agreement between the buyer 
220 and the bank 230 must be reached. Again, a key provision for a Vendor 
Financing agreement includes establishing the rules by which the financial 
institution can identify when the client 220 has accepted good from the 
supplier 210, as previously described above. Other provisions for a Vendor 
Financing agreement include: the amount and form of recourse to buyer 220 
for pre-shipment advances; an agreement by the client 220 to pay the 
financial institution upon maturity of the underlying item; procedures for 
the resolution of post acceptance disputes (usually in the form of a put 
to the client of the underlying asset); procedures for the resolution of 
pre-acceptance disputes; and establishment of reliance on the selected 
method of communication (this will typically place no liability on the 
part of financial advisor 230 to advance funds in the event of 
communications/software failure). 
In addition to an agreement between the bank 230 and the buyer 220 for 
Vendor Financing, an agreement between the bank 230 and supplier(s) 210 is 
also required. The key provisions of this agreement between the bank 230 
and supplier(s) 210 include: secondary recourse provisions, if any; 
procedures for the resolution of pre-acceptance disputes; and hold 
harmless clauses in which no liability on the part of financial advisor 
230 to advance funds in the event of communication/software failure. 
As in the AP financing, the final technical step is for the financial 
institution to obtain extra/intra/internet dial-up and logon access to the 
ERP system of the buyer 220. 
The actual financing process for Vendor financing will be described in 
connection with FIG. 5. As with AP financing, the process starts by the 
client 220 manually or via electronic link sending 510 a request for goods 
(e.g., a Purchase Order) to the vendor 210. The fact of the transmission 
and the contents of the PO are updated in client's ERP system. In parallel 
with the transmission of the PO to the vendor 210, the PO is also sent 515 
to the financial institution 230. This transmission can either be 
initiated by the buyer 220 or by prearranged and/or regularly scheduled 
download by the bank 230. In the preferred embodiment, this download 
occurs via the electronic interface between the bank 230 and the buyer 
220. 
At the bank 230, the PO data are matched against Vendor Profile. The bank 
230 calculates a pre-shipment advance rate applicable to the transaction 
represented by the PO and runs a discount to yield calculation on value 
date to estimated settlement date based on the above calculated advance 
rate. This calculation determines the advance proceeds which will be 
forwarded to the supplier 210. The financial institution then calculates 
payment fee, if any, and creates an electronic payment file for the 
advanced proceeds less the payment fee, if any. 
At this point, the advanced proceeds are transferred 520 from the bank 230 
to the supplier 210, preferably through Electronic Funds Transfer. The 
bank 230, in conjunction with the funds transfer, also sends 525 a payment 
notification to the client 220 which references the client's reference 
data (typically the PO number). The payment notice confirms the payment(s) 
to the supplier 210 and also confirms the estimated maturities. This 
process is slightly different from the process described above with 
respect to the AP financing in that the funds were sent 520 prior to 
notifying 525 the buyer 220. Either procedure is acceptable and can be 
used in either process. 
In step 530 the vendor 210 ships the merchandise to the buyer 220. 
Acknowledgement of merchandise shipment (transfer of title) can be made by 
one of three ways: via the client's 220 receipt of the goods (as evidenced 
by a dock or warehouse receipt); via an invoice transmitted 540 by 
electronic means from the vendor 210 to the buyer 220; or via an invoice 
in hardcopy form from the vendor 210 to the buyer 230. 
Regardless of the method by which the shipment 530 of the goods is 
acknowledged, the buyer 220 updates its ERP system to reflect the receipt 
of the goods. The buyer 220 then matches the delivery/invoice data to the 
PO data corresponding to the delivery. If the acknowledgement data does 
not meet the buyer's 220 payment rules, then adjudication is required 
between the client 220 and the vendor 210 in order to determine the value 
of shipped goods which are ineligible for additional financing. The bank 
230 may invoke the recourse provisions of the agreement and have the 
underlying assets removed from funding. 
If the acknowledgement data meets the client's 220 payment rules, then the 
buyer 220 may deduct any credits due the buyer 220 up to the agreed upon 
percentage and within the total dollar limitation as set forth in the 
agreements. Once the validity of the invoice data has been established, 
the buyer 220 indicates its acceptance of the goods in accordance the 
manner established by the rules between the buyer 220 and the financial 
institution 230. Again, as described above with respect to the AP 
financing embodiment, in the preferred embodiment of the present 
invention, the buyer 220 vouchers the account payable (AP) in its ERP 
system. The voucher must include the payment aging of the individual 
payment for the particular shipment in question. 
Once the verified and vouchered AP has been updated in the client's 220 ERP 
system, the bank 230 is able to log onto the client's 220 intra/internet 
server and extract 560 a file containing the daily AP vouchers. In 
processing the AP vouchers, the financial institution 230 first discards 
vouchered AP's that do not match established vendor profiles (i.e., vendor 
for whom supply chain financing has not been set up). The bank 230 then 
maps vouchered AP's against the vendor profile associated with the vendor 
210 which shipped the goods reflected by the vouchered AP. Using the 
vendor profile, the financial institution 230 calculates the advance rate 
applicable to financing of the particular transaction. 
In contrast to the AP financing previously described, the bank 230 then 
adjusts the discount to yield substituting a final correct settlement date 
(when the first advance was made, the final settlement date was not fixed) 
The final settlement date is the date represented by the client's ageing 
or other rule based date. The financial institution 230 then calculates 
the discount to yield on the remaining unfunded balance of the shipment 
value in order to determine the net proceeds which the bank 230 will pay 
to the supplier 210. The bank 230 then calculates a payment fee (if any), 
creates an electronic payment file for the net proceeds less payment fee 
(if any), and sends 550 the payment via EFT to the supplier 210. 
Once the net proceed payment has been made 550 to the supplier 210, the 
bank 230 sends 560 a further payment notice to the buyer 220. The payment 
notice again includes the client's 220 reference data. Upon receipt of the 
payment notice, the buyer 220 confirms the payment(s) and maturities. In 
the event there is a discrepancy between the client's 220 AP/ERP system 
and the bank's 230 payment notice, manual resolution of difference is 
required. 
To close the Vendor Financing loop, on maturity (the ageing date), the 
client 220 remits 570 the gross proceeds to bank, which settles the 
transaction. 
Although the present invention has been described in relation to particular 
embodiments thereof, many other variations and modifications and other 
uses will become apparent to those skilled in the art. It is preferred, 
therefore, that the present invention be limited not by the specific 
disclosure herein, but only the gist and scope of the disclosure.