invoice interchange – invoice trading for sm es
TRANSCRIPT
Invoice Trading 101 for SMEspresented by InvoiceInterchange
June 3rd, 2015
w: www.invoice-interchange.com
m: +65 8647 7627
find us on:
For product demo, please contact us to arrange a session
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1
Thank You
Introductions
• Me
o Brian Teng
o Professional accountant, banking and finance
o Co-Founder of InvoiceInterchange
• You
o Have never heard of invoice trading
o Would like to learn more about invoice trading and the benefits
o Wanting to better understand how InvoiceInterchange can help you
• What is Invoice Trading?
• Difference between Invoice Trading and Invoice Factoring
• Why Invoice Trading?
• How it works?
• Busting the myths on Invoice Trading
• Case study
• About InvoiceInterchange
• Live Q&A with the speaker
Today’s agenda
SMEs have to constantly manage their cash flow
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• Total value of invoices unpaid as of due date
• Singapore - 41.5% • APAC - 36.2%
• Time taken for SMEs to pay their bills slowed to a 3 year low Q1 2015
Outstanding invoices cause cash flow problems
Bank lending in retrenchment
• SMEs underserved by Asian banks – $1 trillion capital shortfall
• 50% bank rejection rate for SME trade finance
41.5% late payment
50% rejection rate
SMEs ‘squeezed’
The process in which businesses sell their invoices at a discount to a network of investors to obtain immediate cash rather than waiting for invoices to be paid.
• sell invoices individually or in bundles
• Investors compete for your invoice
• advance you money at the most competitive price
Introducing Invoice Trading
>>SMEs
Investors
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Platform
SELLER
What is the difference? (A)
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Banks &
FactoringInvoice Trading
INVESTORSINVOICE
INTERCHANGE>>
SELLER
INVESTORS
INVESTORS
Financier vs.
Why Invoice Trading? (B)
Banks & Factoring Invoice Trading
Flexibility Typically applied against your
entire accounts receivable
You select the invoice you want to sell; single, some or all your invoices, when you want.
Contract Locked into restrictive long-term
contract Sign up with no obligation; Pay-as-you-go
Transparency Hidden fees Transparent: no on-going monthly service
fees, no arrangement fees, no non-use fees
Control Cost is set by the financier
You set your maximum cost of finance. It can never be more, only less
Investors compete to fund your invoices, driving down the cost to you
Set up time Slow set up time: 3 – 6 weeks 48 hours set up time Cash within 24 hours
Confidentiality Debtor typically notified Confidential
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Invoice Trading is mainstream
UK based company
£400 million invoices traded to date since 2011.
Backed by the UK government since 2013 as part of the British
Business Bank initiative.
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US based company
$4 billion invoices traded to date since 2008.
NYSE partnered RecX in 2011.
UK based company
£90 million invoices traded to date since 2012
‘Supply Chain Finance Firm of the Year UK’ award 2013 & 2014
Invoice trading platforms around the world
Invoice Trading growth
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Invoice Trading grew 179% in 2014
Increased
profits turnover employment
Businesses reap the benefits since securing finance through invoice trading
0% 0%5%
10%
20%
35%
90%
80%
60%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Profit / Net income Turnover Employment
Decreased About the same Increased
Average sector growth in UK over last three years +174%
*Source The UK Alternative Finance Industry Report, November 2014, link *Source from The Statistic Portal, searched in May 2015, link
Three in four would choose invoice trading before a bank
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Speed, flexibility, transparency and ease of use were the most important factors in businesses’ decision to choose an invoice trading platform over a bank
5%
29%
29%
33%
37%
40%
50%
50%
52%
52%
53%
71%
5%
38%
29%
17%
26%
30%
35%
35%
33%
29%
37%
24%
53%
24%
35%
28%
21%
30%
10%
10%
14%
19%
11%
5%
11%
5%
0%
11%
11%
0%
5%
5%
0%
0%
0%
0%
26%
5%
6%
11%
5%
0%
0%
0%
0%
0%
0%
0%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Curiosity
Lower cost
Better pricing for invoices
Unable to source funding locally
Unable to get funding elsewhere
Better services
Transparency
Easier to get funded
More flexible terms
Ease of use
More Control
Speed
Very important Important Neither important nor unimportant0 Unimportant Very unimportant
*Source from The Statistic Portal, searched in May 2015, link
How Invoice Trading works
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1. Upload invoice onto Cloud Application
2. Set your maximum price / cost
3. Invoice verified, auction goes live
5. Cash advanced to you$$
LIVE
4. Investors competitively bid for your invoice
How does it work?
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INVESTORSDEBTORSELLERINVOICE
INTERCHANGE>>
Up to 90% Cash Advance Up to 90% Cash Advance – II fee
Debtor pays back
The remainder
Advance + Discount
Day
1D
ay 3
0
Invoice Trading Myths
• Cumbersome application and on-boarding process
– Application approved and login issued within 48 hours!
• Difficult approval process
– High approval rates - creditworthiness assessed against Debtor (your customer)
• Expensive
• Competition amongst investors drives down the cost of funding
• Sign of business in trouble
– Confidential
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Invoice Trading Myths - Expensive
• Pay-as-you-go: Use only when needed, no fees when you don’t
• Typically costs between 1.5% to 4% of face value
No hidden fees
No set-up fee
No on-going monthly fees
No minimum annual fee
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Invoice Trading Myths – Sign of business in trouble
Invoice finance is one of the most commonly
utilised finance solutions for SMEs.
Factoring
• Businesses across the world factor €2.37
trillion in a single year
• In Singapore, there has been a steady
increase in factoring over the last 7 years
with €37.8 billion factored in 2014 alone.
Invoice trading
• In US, over $3.5 billion since 2007
• In UK, over $762 million since 2011
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5% 7% 11% 13% 17% 22% 24% 24%43%
280%
0%
50%
100%
150%
200%
250%
300%
Invoice Trading Myths – Sign of business in trouble
• Many large corporations implement Supply Chain Financing to help their
suppliers:
– Buyer approves supplier invoices to obtain cash through Financier
– Financier offers immediate advance to the supplier
– On due date, Buyer pays directly to Financier
• Win-Win solution
– Supplier reduces DSO, obtain quick low cost money to meet immediate cash flow needs
– Buyer utilises improved DPO to further generate profits
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Case study – Stainless wires
Challenges
• Ability to manage cash flow while Buyer extends payment beyond 30 days when negotiation for better terms is not an option
• Upfront payment often required when buying materials
• Difficult to arrange financing that isn’t restrictive or expensive
Value add of Invoice Trading
• Able to turn invoices into cash within a few days which has helped the firm to grow
• Flexible financing terms and access to capital on demand
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“We briefly looked into factoring, but the Receivables Exchange added so much flexibility. We can choose which receivables to sell and when. We set the terms of each sale. We don’t have to be beholden to a factor or a bank. It gives us one less thing to worry about
Ralph Rosenbaum
Stainless Steel products
Owner, President and CEO
http://www.pddnet.com/sites/pddnet.com/files/legacyfiles/PDD/Manufacturing_White_Papers/2012/06/TRE142CSTD-StainlessSteel-2012-4-18.pdf
Case study - Others
• A U.S. certified heat-resistant glassware manufacturer approached an Alternative Finance Provider (an invoice trading company) for financing that would be more flexible than a bank loan. The Receivables Exchange allows the company to grow without extensive collateral requirements and other restrictions.
• A well known engineering services firm uses Invoice Trading to balance recurring payroll obligations with invoice remittance from customers. The company is able to control cash flow and fuel consistent growth with a flexible and affordable financial solution.
• An information services software developer uses Invoice Trading to manage extended payment terms and fund new product developments. The Receivables Exchange enables the company to access affordable capital and reinvest that capital into growth.
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http://www.businesswire.com/news/home/20120105006039/en/Receivables-Exchange-Funds-1-Billion-Small-Medium-Sized#.VVeQmZP5_pw
About InvoiceInterchange
• South East Asia’s first P2P invoice trading marketplace allowing businesses to selectively sell their outstanding invoices to raise flexible working capital
• We are here to help you with your cash flow needs
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>>SMEs
Investors
How to get started with InvoiceInterchange
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Questions & Answers
