This document provides an overview of invoice trading and how the platform InvoiceInterchange works. It begins with introductions and an agenda. It then defines invoice trading, compares it to invoice factoring, and outlines the benefits of invoice trading such as flexibility, transparency, and control. The document discusses how invoice trading works, busts common myths, and provides a case study example. It concludes by describing the InvoiceInterchange platform and how businesses can get started.
InvoiceInterchange – Introduction to InvoiceTrading
1. Invoice Trading 101 for SMEs
presented by InvoiceInterchange
June 3rd, 2015
e: brian.teng@invoice-interchange.com
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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3. 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
4. • 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
5. SMEs have to constantly manage
their cash flow
5
• 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’
6. 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
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SMEs
Investors
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Platform
7. SELLER
What is the difference? (A)
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Banks &
Factoring
Invoice Trading
INVESTORS
INVOICE
INTERCHANGE
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SELLER
INVESTORS
INVESTORS
Financier vs.
8. 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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9. 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
10. 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
11. 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
12. 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
13. How does it work?
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INVESTORSDEBTORSELLER
INVOICE
INTERCHANGE
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Up to 90% Cash AdvanceUp to 90% Cash Advance – II fee
Debtor pays back
The remainder
Advance + Discount
Day1Day30
14. 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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15. 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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16. 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%
17. 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
18. 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
19. 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