The simple idea is to create an exchange network of invoice payment statuses between ERP/e-invoicing solutions. With these statuses the financing of invoices of (SME) sellers could be improved significantly. This study is done as part of the Supply Chain Community, sponsored by the NL Ministry of Economic Affairs.

1. Feasibility Study SME Financing
Improving financing through standardised exchange of invoice payment status
tomorrow’s transactions today
Douwe Lycklama, Mounaim Cortet

2. Finance gap: how to finance ‘long-tail of suppliers’ with
‘low value invoices’?
Supplier landscape and available financing instruments (non-exhausitive)
Avg. annual spend (invoice value)
High
Supplier finance: Reverse factoring /
Confirming
• Corporate driven, bank operated
programs
• Focus on ‘strategic suppliers’
• SCF providers enter market (w/ also focus
on SME)
Receivables finance: Factoring / Asset-
Based Finance (ABF)
• Supplier driven
• Traditional instruments (factoring, ABP) center
on risk mgt, driving costs
• E-invoicing service providers extend
proposition with ‘early payment’ services
• ‘Longtail’ still largely underserved
2 Improving invoice financing. Douwe Lycklama, Mounaim Cortet – 31 October 2014. © Innopay BV. All rights reserved.
# suppliers
Low
Low High

3. Extending our perspective towards ‘large and SME
buyers’ and their suppliers
Reverse factoring alone is not enough to tap into the whole SME market
Corporate
(investment grade)
Supplier
Large SME
3 Improving invoice financing. Douwe Lycklama, Mounaim Cortet – 31 October 2014. © Innopay BV. All rights reserved.
Independent
contractor
Corporate
(investment
Grade)
N/A
Supplier able to
arrange own
financing at low
rate
Large
SME N/A
Arbitrage not possible.
Buyer too small for unsecured credit facility
Independent
Contractor
Focus M3 study
(‘longtail’, 80%)
Focus existing SCF programs
(‘strategic suppliers only’, 20%)
Buyer
Focus of
study

4. Long-term vision on SME receivables financing
Availability of invoice status information is key enabler of innovation in receivables financing
What is it about?
• Improve financeability of invoices through standardization of invoice status information*
• Share invoice status information electronically in ‘trusted network’ (four-corner model)
• Decouple ‘onboarding’ (KYC) and ‘financing’ from the Buyer side
• Unlock market of large/SME buyers and their longtail suppliers for STP financing
• Enable different financiers to tap into SME market (banks, factors, ‘alternatives’)
Why standardization?
• More insight in ‘quality’ of receivable invoices
• Better risk assessment (reduce information assymetry gap)
• Automated and cost effective SME financing
How to realize?
• Standardize invoice status information
• Standardize exchange via four-corner model: extend ‘Simplerinvoicing’ network towards
‘Simplerfinance’ network
• Enable financiers to have access to invoice status data (directly via API or indirect)
* Status information should ultimately encompass various ‘risk’ information ranging from simple message by the buyer that invoice has been received to a ‘guarenteed
payment’ of the invoice on date x. Part of this feasibility study is to assess what status information is relevant from a risk management and financing perspective.
4 Improving invoice financing. Douwe Lycklama, Mounaim Cortet – 31 October 2014. © Innopay BV. All rights reserved.

5. Develop standards suite for exchange of invoice status
information in four-corner model
Standardizing invoice status information and its exchange will unlock the SME market
Financier Supplier Buyer
5
6
1
Existing ERP/invoicing
solution
5 Improving invoice financing. Douwe Lycklama, Mounaim Cortet – 31 October 2014. © Innopay BV. All rights reserved.
Status Broker
7 Trade
1
2
3
Electronic invoice 4
Invoice approval
Finance request
5 Status information broadcast
Status information broadcast
Existing ERP/invoicing
6
Receivables Finance Model
Finance Exchange Status Aggregator
5
solution
7 Pre-payment (‘deal closure’)
6 4
Four-corner model
1 2
3
1
Acceptance
Existing ERP/invoicing
solution
Existing ERP/invoicing
solution

6. Different financing use-cases can be distinguished
Availability of invoice status information is a key driver to improve financeability of invoices
Financier Supplier Buyer
5
6
1
Existing ERP/invoicing
solution
6 Improving invoice financing. Douwe Lycklama, Mounaim Cortet – 31 October 2014. © Innopay BV. All rights reserved.
Status Broker
7 Trade
1
2
3
Electronic invoice 4
Invoice approval
Finance request
5 Status information broadcast
Status information broadcast
Existing ERP/invoicing
6
Receivables Finance Model
Finance Exchange Status Aggregator
5
solution
7 Pre-payment (‘deal closure’)
6 4
Four-corner model
1 2
3
1
Acceptance
Existing ERP/invoicing
solution
Existing ERP/invoicing
solution
2

7. Customer journey from a supplier perspective
Enabling a One-Click Finance experience
7 Improving invoice financing. Douwe Lycklama, Mounaim Cortet – 31 October 2014. © Innopay BV. All rights reserved.

8. Relevant stakeholders recognize the potential of this
model for easier SME financing
Interviews executed so far Next interviews
Banks
Buyers Platform providers
Industry organizations Platform providers
8 Improving invoice financing. Douwe Lycklama, Mounaim Cortet – 31 October 2014. © Innopay BV. All rights reserved.
ERP/Accounting software
E-invoicing service providers
Factoring companies

9. What do you think?
Key discussion points
1. What invoice status information should be standardized to improve the
financeability of receivable invoices?
2. What risks are reduced by this invoice status information (fraud, dillution,
counter party, ...)?
3. Is there financial value and for which parties?
4. What are the main challenges of the long-term model?
5. ...
9 Improving invoice financing. Douwe Lycklama, Mounaim Cortet – 31 October 2014. © Innopay BV. All rights reserved.

10. tomorrow’s transactions today
Thank you
For your attention
Douwe Lycklama, douwe.lycklama@innopay.com, +31 6 557 111 50
Mounaim Cortet, mounaim.cortet@innopay.com, +31 6 417 686 51