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InvoiceInterchange – Introduction to InvoiceTrading
- 1. Invoice Trading 101for 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 >> 1
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- 3. Introductions • Me o BrianTeng 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 isInvoice 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 toconstantly 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 inwhich 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 5 Platform
- 7. SELLER What is thedifference? (A) 7 Banks & Factoring Invoice Trading INVESTORS INVOICE INTERCHANGE >> 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 8
- 9. Invoice Trading ismainstream 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. 9 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 10 InvoiceTrading 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 fourwould choose invoice trading before a bank 11 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 Tradingworks 12 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 itwork? 13 INVESTORSDEBTORSELLER INVOICE INTERCHANGE >> 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 14
- 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 15
- 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 16 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 17 “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. 18 http://www.businesswire.com/news/home/20120105006039/en/Receivables-Exchange-Funds-1-Billion- Small-Medium-Sized#.VVeQmZP5_pw
- 19. About InvoiceInterchange • SouthEast 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 19 >> SMEs Investors
- 20. How to getstarted with InvoiceInterchange 20
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- 22. Want to findout more? Please contact us! info@invoice-interchange.com 22