ECO WARRIOR Invoice Finance can support both the customer and the supplier in the credit ecosystem. AUTHOR – Sean Feast FCI<strong>CM</strong> Credit managers are invariably trying to be constructive in their dealings with customers. If a customer tells a credit manager they have a cashflow problem then the first thing the credit manager wants to know is how bad and how long. – Nick King FCI<strong>CM</strong> Brave | Curious | Resilient / www.cicm.com / <strong>December</strong> <strong>2023</strong> / PAGE 24
INVOICE FINANCE It’s not untypical, especially in the current economic uncertainty, for a business to be contacted by a customer who says they are experiencing financial difficulties and are talking to people.’ – Bryony Crossland FCI<strong>CM</strong> TIMES are changing and attitudes are shifting in the supplier/customer relationship. In the old days, a customer who called a business to say it was struggling to pay for the goods supplied would have sent alarm bells ringing loudly around the building. It still does, but the response today is changing. Today it is no longer about winding up petitions, administration or insolvency. Bryony Crossland FCI<strong>CM</strong>, says it is increasingly about working with that customer to find a way through its difficulty. “It’s not untypical, especially in the current economic uncertainty, for a business to be contacted by a customer who says they are experiencing financial difficulties and are talking to people. Our members might then ask whether they are going into administration, or are planning to restructure, or occasionally they might ask for an introduction to someone who can help them with their cashflow, such as an Invoice Finance provider. “What credit managers often find is that it’s their customer’s customer that is causing the difficulty. They may hear that their customer has not been paid by company x, and they give you a name, and it transpires it’s the same name you’ve heard three times in the last month. “So what if the credit manager introduces an Invoice Finance provider to company x? Because it’s they who are having the problem and the knockon effect is impacting three other customers that the credit manager is dealing with. Peeling back the layers and understanding where the working capital issue is actually coming from is key, and the skill of the credit manager is in understanding this challenge and making the right introductions where appropriate.” Bryony says she is disappointed but not surprised that Invoice Finance is not better understood: “There are many businesses who just don’t know where to start to restructure their finances,” she says. “They may go to their banks, but they don’t seem to know about all of the other options available to them.” Partnership relationships Credit managers treating their organisation’s customers as partners, especially in difficult times, is something of a mindset shift. From the credit manager’s perspective, however, it helps retain a potentially valuable relationship: “It helps them survive, which in turn helps the credit manager to get paid, but more importantly it addresses the root cause issue. It prevents another failure which also helps other suppliers. “Restructuring is not a bad thing,” she continues. “It means we want your business to succeed. Today it’s about identifying there is a problem and working together to help businesses come out of the other end. Invoice Finance is, of course, not the only cashflow show in town. Supply Chain finance is another option, and credit managers are constantly looking at ways of helping customers as opposed to closing them down. Nick King FCI<strong>CM</strong> has at various stages in his career looked at different ways of supporting customers, including spot Invoice Finance: “This allowed customers to submit individual invoices via a portal for Invoice Finance providers to bid for,” he explains. “It was short-term way of helping smaller businesses receive an immediate injection of cash but without having to enter a long-term relationship.” Nick says he also has experience of supply chain finance, though has never been a particular fan: “I’m never quite sure why I should pay more to get paid on time,” he laughs. Whatever cashflow solution a business is looking at, Nick says it is important they understand what they are letting themselves in for: “Whatever finance you choose, you need to be very clear what you are hoping to get out of it. There are various options out there, but you need to be clear on the consequences and clear what your exit plan is. Is it a short-term issue you have or an ongoing challenge you are looking to address.” He agrees with Bryony that credit managers are invariably trying to be constructive in their dealings with customers: “If a customer tells a credit manager they have a cashflow problem then the first thing the credit manager wants to know is how bad and how long. Keeping a customer over the longer term has to be a good thing so it’s about finding the right fit.” Ant Persse FCI<strong>CM</strong>, Chief Executive of Optimum Finance, recently addressed some of the challenges at a CI<strong>CM</strong> Think Tank. He not only sees how Invoice Finance supports businesses with cashflow issues, but also how it can support both the customer and the supplier in the credit ecosystem: “Sometimes a customer is not having issues beyond having reached the limit of the credit that the supplier will extend,” Ant explains. “The risk then is that they take their business to a competitor, and the existing supplier misses out. By recommending Invoice Finance to them, however, and receiving funds upfront, they can use that cash to pay the balance that is outstanding. That means that as the supplier, you can free up more credit for them to buy more goods, and prevent them from looking elsewhere. It’s a ‘win win’ for everyone.” Brave | Curious | Resilient / www.cicm.com / <strong>December</strong> <strong>2023</strong> / PAGE 25
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