The European Parliament approved Directive 2011/7/EU to combat late payments in commercial transactions. The European Payment Directive limits the time corporations have to make payments to their suppliers. However, buying organizations face higher Days Payable Outstanding (DPOs) and lower liquidity due to shorter payment terms. This detailed research paper examines why supply chain finance is an effective solution for managing working capital efficiently under the EU Payments Directive by improving supplier cash flow while enabling corporations to maintain payment term flexibility with their suppliers.