Reverse factoring in the supply chain: objectives, antecedents and implementation barriers

Abstract

Purpose Reverse factoring (RF) can generate win-win situations for buyers, banks and suppliers. However, the SCM literature generally tends to ignore financial influences and accounting support structures. Research in the area of reverse factoring is relatively new and considerably fragmented. To address this research gap this paper provides an analysis of the objectives, antecedents and barriers of implementation. Design/methodology/approach The study contributes fundamental new insights derived from eleven case studies. 28 interviews were conducted from the perspective of buyers, banks and suppliers and analyzed regarding influencing factors of different RF approaches. Findings Reverse factoring predominantly is used to extend days payable outstanding (DPO). However, secondary objectives such as the reduction of supplier default risk and process simplifications also play an important role. The number of integrated suppliers, dependence of suppliers on their buyers, spread between internal refinancing and RF costs and the diversity of target agreements strongly influence these objectives and therefore the configuration of RF solutions. Originality/value Most studies fall short of exploring the mechanism of reverse factoring from all of the different perspectives of buyers, banks and suppliers. This approach allows new insights regarding prerequisites and different motivations behind RF.