So far we have looked at traditional bank programs, P-cards, and FinTech platforms as working capital options for companies looking to maximize liquidity and their cash-conversion cycle. In the final installment of our series, we will look at the LSQ solution.
Like the previous three installments, we will look at LSQ across five factors that have proven to be key to a successful program:
- Access for suppliers
- Funding stability
- Cost of capital
- Supplier Support
For 26 years, LSQ has provided working capital solutions to thousands of companies of all sizes. For the majority of that time, LSQ has focused on accounts receivable (or invoice) finance. This solution allowed suppliers to gain access to early payments by factoring their invoices through LSQ – often up to 90 percent of the invoice value in less than 24 hours.
A few years ago, LSQ began exploring options to serve the other side of the supply chain dynamic – the corporate buyer. To do this, the company launched LSQ FastTrack® to provide supply chain finance solutions. Today, the platform serves both supply chain finance, dynamic discounting, and invoice finance clients while providing comprehensive payments, credit, and payments management.
The availability of supply chain finance programs is one of LSQ FastTrack’s key features. LSQ’s offerings have a much more expansive ideal customer profile. This allows LSQ to move up and down market for both buyers and suppliers. For a buyer profile, that means LSQ can serve companies with annual revenue ranging from $100 million to more than $2 million and $50 million to more than $1 billion in yearly accounts payable spend.
Other programs (banks and FinTechs) are usually limited to only an enterprise’s largest suppliers (top 10-20 percent of spend). LSQ funds early payments to suppliers across the supply chain. The mid-and long-tail suppliers are usually small-to-medium businesses that are shut out of other programs are the companies that have the most need for working-capital assistance.
LSQ does not use marketplace or auction models like FinTechs. Over its 25 years, LSQ has built numerous partnerships with some of the largest banks and non-bank lenders in the country to help provide funding for its programs. Additionally, LSQ uses its own capital to fund programs. All this means that predictable funds – with price certainty – are always available for suppliers requesting early payment. Knowing that payments are coming allows suppliers to more accurately predict cash flow and make better production decisions all while ensuring a healthy supply chain for buyers.
Cost of Capital
Compared to bank programs, LSQ will have a higher cost of capital. Unfortunately, it is part and parcel of working with buyers and suppliers with more challenging financial situations and having a more expansive credit box.
As mentioned above, however, the pricing is predictable and transparent. Additionally, LSQ’s supply chain finance programs have a decaying fee structure for suppliers. This means that as the invoice matures, the cost of capital goes down; suppliers taking payment on day 15 will pay less than a supplier taking payment on day five. When a supplier requests early payment, the fee is clearly stated within the platform before submitting the request.
When LSQ moved into the supply chain finance space, the company made a significant investment in the FastTrack platform. LSQ FastTrack is the easiest to launch and use working capital platform that lets clients access their cash in a few clicks. The platform touts a simple and intuitive user interface and fully responsive on mobile devices and an ADA-compliant design.
The solution integrates with buyers’ and suppliers’ overall financial tech stack, including enterprise resource planning (ERP), procurement, accounts payable and receivable automation, and core bank systems. These integrations lead to simple reconciliation, reporting, and data analysis with no technical resources required from the client. Additionally, LSQ FastTrack is embedded into the LexisNexis CounselLink® legal spend and matters platform and the Esker Pay accounts payable automation solution.
Using LSQ’s extensive data capabilities, FastTrack provides in-depth analytics and reporting that give insights into important facets of the health of the overall supply chain. Data is only as useful as its ability to be interpreted and understood. To that end, FastTrack has the ability to generate clear reports on the important aspects of a working capital management program.
LSQ FastTrack also focuses on security and privacy to protect clients’ data and funds. The platform is WCAG and SOC 2 compliant and uses multi-factor authentication, data encryption, and account verification to harden safeguards against threats.
When it comes to any working capital management program, having suppliers onboard and actively participating is key to unlocking liquidity. As part of the process of setting up a supply chain finance program with a buyer, LSQ analyzes the company’s spend data to identify suppliers most likely to adopt the solution and which suppliers’ participation would provide the most efficient path to unlocking working capital. These suppliers become the priority of LSQ’s dedicated Supplier Success team. The supplier outreach process takes place in three phases:
Perform Outreach Analysis
LSQ will evaluate accounts payable (AP) data from the buyer and supplement it with third-party and proprietary data about their suppliers. With this data, LSQ provides working capital and spend insights to the buyer and formulate a plan to prioritize supplier outreach.
Create an Outreach Timeline
LSQ’s supplier success team has extensive experience onboarding and interacting with suppliers and recommends a three-phase approach to outreach over several weeks. The outreach effort combines email and calling efforts with the buyer and LSQ.
Create Outreach Content
Creating enticing, professional content that is transparent and direct is key to successfully enrolling suppliers. LSQ works with the buyer to create a variety of high quality brochures, videos, websites, emails and other content tailored to the program.
Once suppliers decide to participate, they can be onboarded in a few days, allowing invoices to be added to the system for faster payment without stress and paperwork. The Supplier Success team is then available to help suppliers with any questions or concerns they may have at any point in the life of the program.
When viewed as part of the greater working capital landscape, LSQ FastTrack offers the most comprehensive solution available. There is little compromise across the five key factors discussed in this blog series. Through the thoughtful creation of programs, an extensive and flexible funding network, and best-in-industry software platform, LSQ offers an unparalleled experience for companies looking to make the most of their working capital.