CM December 2023

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 FCICM
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
FCICM, 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 FCICM 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 FCICM, Chief Executive of Optimum
Finance, recently addressed some of the challenges
at a CICM 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 / December 2023 / PAGE 25