Homebreadcumb forward arrow iconBlogbreadcumb forward arrow iconSupply Chain Managementbreadcumb forward arrow iconFinancial Supply Chain Management: Explanation, Importance, Processes, and Benefits

Financial Supply Chain Management: Explanation, Importance, Processes, and Benefits

Last updated:
19th Sep, 2022
Read Time
7 Mins
share image icon
In this article
Chevron in toc
View All
Financial Supply Chain Management: Explanation, Importance, Processes, and Benefits


Supply chain and Finance are two topics that are interrelated and are dependent on each other. Where supply chain refers to all the processes that help a company provide its products and services to the customers, finance refers to all the monetary transactions carried out within a company. Since most of the finance sector of a company is dependent on its customers and the outreach, the company’s supply chain plays a very crucial role in performance and revenue. In the United States, supply chain operations account for around ten percent of GDP, which is almost $1 trillion. Financial Supply chain management is a sector that deals with both supply chain management and financial management and considers both of the processes as a whole instead of viewing them as individual processes. Here in this article, we will be discussing Financial Supply chain management in a more defined manner, covering most of the topics which a beginner should know.

Learn Supply Chain Management Courses online from the World’s top Universities. Earn Masters, Executive PGP, or Advanced Certificate Programs to fast-track your career.


FSCM or Financial Supply Chain Management refers to the process of combining the individual fields of Finance and Supply chain holistically. FSCM has been derived from Financial Supply Chain. The Financial Supply chain refers to all the transactions that occur between trading partners, such as sellers and customers, in a financial or monetary form for the production, purchasing, and supply of goods and services. Financial supply chain management helps a company get in enough finances to cover all the expenditures spent on carrying out the supply chain processes. The introduction of supply chain financial services from the financial organization with various approaches to payable procedures and payment arrangements among trading partners gave rise to the idea of Financial Supply Chain Management. Huge participants and external financial suppliers provide financial services that enable the supply chain as a whole to become more efficient while competing. It fundamentally simplifies the design of payment operations by using open accounts while also allowing small members to benefit from the best credit ratings of more significant contributors, lowering their capital expenses. Ultimately, it enhances the value chain’s short-term liquidity and strengthens long-term supplier-buyer ties.

Our Top Management Programs & Articles

Importance of FSCM

In any company which offers goods and services, the finance, insurance, and transaction costs typically contribute to around 5% of the amount spent on the unit price of that good or service. Since these components are all included in the FSCM, businesses must strengthen their end-to-end financial supply chain management to get the most out of the offerings. Plus, it’ll also help them maximize customer satisfaction.

Typically, there are two factors that contribute to a favorable atmosphere for Financial Supply Chain Management. The first one is that since network technology has evolved, it has resulted in more visibility throughout the physical supply chain. If the supply chain processes are more transparent, then it would surely attract more customers. The other factor is a thorough awareness of end-to-end procedures and collaboration both within and outside the company to let the customers have a piece of good information about the company’s offering. The actual problem for the finance, treasury, and banking domain is persuading businesses that better financial supply chain operations will result in a lower cost of products sold, more productivity, and better financial savings management data. Here is when Financial Supply chain management comes into play.

Processes in FSCM 

Financial Supply Chain Management consists of three major processes. These processes include the Procure-to-Pay (P2P) cycle, Working Capital Management, and the Order-to-Cash (O2C) cycle. These processes not only deal with the financial and supply chain flow but also focus on the requirements of the employees in a company.


  • Procure-to-pay (P2P) cycle 

The Procure-to-Pay process describes the trading cycle from the perspective of the firm purchasing resources, commodities, or services. The corporation selects, gets, and settles for the components needed to manufacture the services or goods they provide to their consumers throughout this procedure.

  • Working Capital Management 

Working capital management is a strategic budgeting approach that a business develops to manage current resources and liabilities for sustaining its financial efficiency. It does so by ensuring that the company has enough working capital to satisfy brief expenditures such as paying utility bills and employees any short-term financial commitments. Working capital management reduces the time it takes to transform assets and liabilities into money while also assisting in the improvement of profits and, most crucially, profitability. Inventory management, as well as accounts receivable and payments, are all part of working capital management.

  • Order-to-Cash cycle

The Order-to-cash cycle is similar to the P2P process, but it is viewed through the lens of the corporation delivering the supplies, commodities, or services. It begins when the seller provides their customers with an estimate and finishes when the payment is received, and the bill is reconciled. Trade receivables are an essential part of this cycle from a financial standpoint. The accounting department must generate revenue in the most effective and timely manner possible after the invoices have been issued.

Advantages of FSCM 

Financial Supply Chain Management offers benefits to both the suppliers and the buyers since both of them are the two essential parts of the supply chain. It provides a number of benefits for purchasers. The buyer is able to stabilize the supply chain, optimize working capital, generate positive cash impacts, boost credit rating, and raise liquidity due to the extended credit duration. The provision of early payment alternatives appears to be the sole evident benefit for suppliers. Apart from that, they benefit from being able to minimize outstanding bills, obtain favorable financing rates, reduce financing expenses, make flexible decisions, and increase efficiency. Not only that, but correctly managed supply chain management may aid in the development of trust, confidence, and hence the strengthening of the buyer-supplier relationship. This would allow them to work on better terms and for a more extended amount of time.

If you’re interested in learning about Financial Supply Chain Management and building a strong career in the domain, then you can check out the Global Master Certificate in Integrated Supply Chain Management offered by the Michigan State University, which is ranked No.1 in providing supply chain degree graduate programs, in collaboration with upGrad. The course offers many advantages such as resume building, 1:1 interaction with mentors, live faculty interactions, student support, discussions, and many more.


Financial supply chain management is highly significant in today’s world. It is not just required by large corporations; small firms and startups can tremendously benefit from it as well. In a world where many businesses face fierce competition, financial supply chain management provides a safe, collaborative, and prudent means to guarantee that everyone participating in the process, including consumers, sellers, third-party members, and others, stand to gain from it.

Featured Program for you: Global Master Certificate in Integrated Supply Chain Management from Michigan State University


Sandeep Pereira

Blog Author
Responsible for working with the various teams and other management to establish long-range goals, strategies, plans and policies and set up new programs at upGrad. With a demonstrated history of working in the EdTech industry.
Get Free Consultation

Select Coursecaret down icon
Selectcaret down icon
By clicking 'Submit' you Agree to  
UpGrad's Terms & Conditions

Frequently Asked Questions (FAQs)

1What is Supply Chain Management?

The planning and administration of all tasks performed in purchasing and procuring, converting, and all logistics management procedures are all included in supply chain management. Planning and communication with channel partners, which might consist of vendors, distributors, third-party service providers, and customers, is also essential. Supply chain management, in essence, blends supply and demand management inside and between businesses. The fundamental objective of supply chain management is to combine important business operations and business processes inside and across firms into a unified and high-performing business model. It coordinates tasks and procedures with and across advertising, marketing, product development, financing, and computer technology, and it incorporates all of the logistics management functions mentioned above, as well as manufacturing operations.

2What is a Supply Chain?

From the company's supplier to the client's customer, the supply chain, as it is now known globally, covers every effort involved in making and delivering a finished product or service. Handling supply and demand, procuring raw materials and parts, production planning, storage and inventory monitoring, order entry and order management, delivery across all channels, and shipment are all part of supply chain management. The management of the supply chain, because of its broad nature, must address complex interdependencies, effectively establishing an extended organization that extends well beyond the factory door. Material and service providers, channel supply partners such as wholesalers/distributors, retailers, and customers, as well as supply chain management advisors, software product vendors, and system developers, are essential actors in supply chain management today.

3Why is SCM important?

There are two primary reasons why SCM is important, money and opportunity. Advances in information technology (IT) and developing IT infrastructure are presenting new chances to enhance service and efficiency, and the stakes are high given the amount of money at risk. Some individuals consider supply chain management's IT solutions to be the backbone of e-commerce. Because manufacturing quality is reaching parity across the board, addressing customers' individual product delivery requests has emerged as the next significant competitive advantage potential. Companies that understand how to enhance supply chain management will become the following success stories in the global market.

Explore Free Courses

Suggested Blogs

44 Most Common Supply Chain Management Interview Questions & Answers [For Freshers & Experienced]
There are a lot of sectors that have witnessed significant growth since the pandemic and emerged as economic boosters. Supply Chain is one among them.
Read More

by Sandeep Pereira

19 Feb 2024

Supply Chain Management Salary in India in 2023 [For Freshers & Experienced]
It wouldn’t be overstating things to say that Supply Chain Management (SCM) is full of risks and unprecedented crises. Case on point — Sony’s 20
Read More

by Sandeep Pereira

18 Feb 2024

Basic Components of Supply Chain Management
Supply chain management covers every aspect of a product’s lifecycle, right from obtaining its raw materials to delivering a full-fledged product made
Read More

by Sandeep Pereira

29 Jun 2023

A Guide to Supply Chain Management in eCommerce
What is eCommerce Supply Chain Management? Supply Chain Management in eCommerce refers to managing and coordinating activities in online retail opera
Read More

by Keerthi Shivakumar

27 Jun 2023

6 Types of Supply Chain Models To Know
Introduction  A supply chain is a group of people and businesses responsible for producing and getting a product to the consumer. The raw material pr
Read More

by Keerthi Shivakumar

27 Jun 2023

Supply Chain Planning: Demand Forcasting in SCM
Introduction Demand forecasting is the act of organizing and foreseeing the demand for goods and commodities to support businesses in remaining as pr
Read More

by Keerthi Shivakumar

27 Jun 2023

What is Supply Chain Management Process in 2024
Introduction The world supply chain has been disturbed since the break out of covid-19 pandemic. We all have heard that due to disturbances in the wo
Read More

by Keerthi Shivakumar

27 Jun 2023

Top 10 Supply Chain Management Books To Increase Your Horizon
Businesses nowadays are involved in cut-throat competition with each other. Whenever a new business opportunity presents itself, the race to reach the
Read More

by Sandeep Pereira

26 Sep 2022

How to Get Your Dream Supply Chain Management Job?
Introduction What exactly is Supply Chain Management? Supply chain management integrates demand and supply management not just inside a business but
Read More

by Sandeep Pereira

12 Sep 2022

Schedule 1:1 free counsellingTalk to Career Expert
footer sticky close icon