Building trust with your supplies is essential for ensuring the resilience of your supply chain. Suppliers determine when, how, and in what state your customers get your products.
But how can businesses guarantee their suppliers will always perform at the highest caliber? And in turn, how can suppliers communicate to their end customers that they are the right business to partner with? Through financial transparency.
Suppliers who share financial information with their end customers demonstrate their capability as a partner. More so, they show that when unforeseen events occur, they have the financial wherewithal to counteract disruptions.
When a supplier faces financial challenges, having access to their financial information allows organizations to take necessary actions—such as adjusting payment terms or utilizing escrow—to support the supplier and prevent disruptions in the supply chain. This helps minimize the impact of risks, reduces the potential for disruption, and maintains business continuity.
Financial transparency also creates opportunities to expand contracts with suppliers who have additional capacity. Partnerships can translate to new opportunities when a supplier is financially strong, allowing you to leverage your established relationship for new projects.
Financial transparency can play a strategic role for organizations looking to boost their supplier program. However, gathering supplier financials can be time-consuming and resource intensive. Companies can overcome this by leveraging tools, such as RapidRatings’ FHR and Financial Dialogue Report.
The Financial Dialogue report is a discussion framework that helps organizations hold constructive conversations with their suppliers to deepen their understanding of financial challenges or explore contract expansion opportunities.
The Financial Dialogue report includes analysis on parts of the financial statement that could have the greatest impacts on operations—such as a supplier’s profit margins, interest coverage, cash ratio, and working capital. When evaluating a company, the Financial Dialogue identifies and prioritizes the most relevant financial topics for discussion. These recommendations facilitate productive and open communication between you and your suppliers.
They also have comparative capabilities to benchmark and analyze cohorts of suppliers. This provides insights to identify suppliers who have the capacity to grow with your business.
Through financial transparency, and with tools to optimize your risk management approach, you can ensure you have the most resilient supplier relationships at your helm. This leads to a stronger supply chain capable of keeping disruption at bay and giving you a competitive advantage.
Learn more about RapidRatings and SAP integrated financial health solution.
Discover the ways financial health reviews can help organization boost supply chain resilience.
