The Letter of Credit has long been one of the most accepted and familiar financial instruments in foreign trade. As global manufacturers continue to develop closer working relationships with their vendors, however, greater numbers of transactions have begun to be conducted by OA and Purchase Orders.

Bankers who were initially worried about losing L/C business have turned to new ways to satisfy their customers' international banking demands, say experts with the Bankers' Association for Finance and Trade, and customers are responding.

Savvy foreign traders know that the financial supply chain is just as important as the physical supply chain, and they leverage the knowledge and experience of their bankers to optimize their business, gain information, and mitigate risk. At the same time, the cost of overlooking this reality is significant. A leading financial consultant estimates that the typical $1 billion company spends $27 million for unnecessary working capital and inefficient processing functions because of the lack of visibility.

What are some of the products and services banks are promoting? Planned P/O financing is one. Information that in turn will create more flexible purchase-to-pay solutions using the Purchase Order and event management is another. Banks also see opportunities related to the facilitation of Account Payable settlement for importers that are weighed down by inefficiencies, integration obstacles, and a lack of coordination between the flow of money and the supply chain.

David Gustin, managing partner with Global Business Intelligence Corp., says there are a few other solutions that help companies think through the liquidity, working capital, risk, and logistics challenges beyond their four walls:

• ERP/Treasury systems/bank integration solutions. Centralized treasuries are the norm in handling not only cash and credit needs, but also in helping to drive regional or global financial supply chain solutions. These treasury groups are implementing new systems to help provide visibility into cash--not an easy proposition, admittedly, given complex company structures and bank relationships.

• Electronic documentation and compliance--cleaning up inefficient processes, reducing discrepancies, and trying to accelerate cash flow.

Whether your company is an SME or huge multinational, experts emphasize that an investment towards improving the financial supply chain is a wise decision. Companies with the most sophisticated and effective material supply chains sometime have poor financial supply chains, they note. Fortunately, there's a wealth of resources available--and you can bank on it.