Business Finance Archives | Page 2 of 5

Growth finance: how flexible business finance funds progress

Posted on October 1, 2024November 27, 2024 by Russell Walsh

Businesses face many challenges, and when they strive to grow, they often find that growth hampered by inadequate funding, or working capital. So how do they evolve?

In this article, discover the factors that limit business growth and explore why using cash in the bank or profits is sometimes an unsustainable approach to funding growth. If you’re ready to progress your business, it’s time to consider growth finance and find out how tailored working capital solutions can provide the right support for sustainable growth.

Growth challenges: why most businesses fail to grow

Is your business failing to grow despite your best efforts? Business growth can be difficult at the best of times, but in an environment of global uncertainty, rising inflation and slowing economies, even the world’s most successful companies are struggling to increase revenues.

McKinsey & Company conducted a wide-reaching study of the growth and performance of the 5,000 largest public companies in the world over the past 15 years. The average revenue growth in the 10 years before COVID-19 was just 2.8% a year. Only one in eight businesses surveyed enjoyed a growth rate of more than 10% a year. The post-COVID-19 years haven’t been any easier.

Economic conditions aside, businesses also make common mistakes when trying to expand. Octet’s NSW Director of Working Capital Solutions, Dan Verdon, identifies a few factors that can hinder meaningful growth and, therefore, profits.

A need for more strategic planning. “Businesses with a well-defined and communicated strategy, which aligns with their short-, medium- and long-term goals are much more likely to be successful.”
A need for more capital. “Most businesses underestimate the level of capital required for sustainable growth.”
A need for understanding where cash flow is tied up in the business. “There are four main cash flow levers: accounts payable, accounts receivable, inventory and their own cash. Understanding how to use each of those sources and when is really important.”
Scaling too quickly. “A lot of businesses might have a good product or a good service, but they grow too rapidly and then can’t sustain it.”
A need to acquire and retain talent. “Attracting and retaining good people, especially in highly skilled roles, is a major challenge for a lot of new businesses.”

The sustainable way to grow

For the best chance of success, it’s also important to identify where to concentrate your growth efforts. McKinsey & Company has discovered that businesses give themselves a much greater chance of outperforming when they invest in three pathways for growth:

Expanding the core business by focusing on excellence in the areas in which they currently operate.
Innovating in adjacent markets by seeking ways to adapt to serve new customers.
Developing breakout businesses by identifying and exploiting new opportunities.

“Having a finance partner who can help you understand what levers to pull and unlock cashflow tied up in your business can help growth in all three areas,” says Dan.

Leveraging business growth finance for expansion

To fund their growth, many businesses set annual budgets based on previous yearly figures and use internal sources of funds, such as their profits or cash in the bank, rather than external financing, such as a loan or line of credit. However, this approach can affect profitability and hamper growth by leaving businesses without the financial flexibility to invest in innovation. While avoiding debt might seem preferable, if profits are down or cash flow slows (say, due to customers taking longer to pay their bills), a business’ ability to scale, innovate and compete effectively is seriously impacted.

As we head into 2024, the economic challenges of high inflation, rising costs and a slowing global economy will continue to put a strain on business profits. Using finance to fund expansion makes sense. “Working capital facilities can support and encourage sustainable growth,” says Dan. “They are self-liquidating, so come with fewer risks than, say, a traditional fixed-term bank loan.”

How Octet can assist with financing business growth

So what are working capital finance solutions, how do they fund expansion and how can a financier such as Octet support business growth?

A streamlined working capital solution, such as Debtor Finance, (also known as invoice finance) allows businesses to access funds tied up in unpaid invoices to accelerate cash flow. By freeing up this cash, a business can capitalise on growth opportunities. This could include importing goods from new suppliers and exploring different product lines.
Looking to expand into different regions? Octet can support your business through a Trade Finance facility. Dan explains: “Say the business is in Australia and wants to expand into another country, but they can’t get finance facilities in that country. With Octet’s facility, they can donate a portion (or all) of the limit to the overseas entity (subject to the Australian parent’s credit assessment) and then use that funding for their overseas business growth requirements.”
An Octet Term Loan allows businesses to borrow up to $2 million, with flexible terms ranging from three months to three years, to unlock additional working capital to expand operations or acquire new assets.
Octet can help your business with the process of onboarding new local or overseas suppliers. “We do the verification checks of those suppliers so the business knows they’re trading with someone who is legitimate.”
Octet tailors our flexible funding solutions to a business’ needs. “We bring all the different working capital solutions – debtor finance, trade finance, credit cards – into one smart ecosystem.”
Octet helps businesses increase the visibility of their entire supply chain, allowing them to see and act on potential blocks or gaps. Supply Chain Accelerate is a flexible funding solution that pays 100% of supplier invoices instantly, while giving businesses up to 90 days to repay.

A finance solution that grows with you

Octet has a suite of fast, flexible finance solutions we can tailor to power your business growth. Speak with our team of working capital experts today to discover what’s possible for your business.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

Why supplier relationships matter and what you can do to improve them

Posted on October 1, 2024November 21, 2024 by Duncan Khoury

When you’re busy growing a business, it can be easy to focus on day-to-day operations and let the big picture take a backseat. For many buyers, this can see them taking their suppliers for granted and expecting them to deliver more, without first building the foundational relationship to support it.

Supply chain pressures have continued to evolve post-COVID, reshaping how businesses manage their relationships. While the immediate crisis may have passed, ongoing global challenges—such as geopolitical tensions, inflation, and technological disruption—are now pushing more businesses to recognize the benefits and necessity of strategic buyer-supplier relationship management. A stronger relationship between your business and its suppliers makes it easier to negotiate, meet your customer’s needs, and seize opportunities to grow together.

This article explores why it’s critical for businesses to go beyond building efficiency and cost-effectiveness in their supply chain strategy, and invest in fostering stable, reliable supplier relationships.

A close supplier-customer relationship is a win-win

While businesses often focus on the customer, the relationship between a business and its suppliers is about much more than just transactions. From navigating challenges together to negotiating stronger deals, building longstanding relationships is in both parties’ best interests.

Instead of a one-sided power dynamic, successful relationships are mutually beneficial partnerships. They create a collaborative environment where trust and cooperation replace purely transactional exchanges.

The risk of a one-sided business relationship

Despite the benefits of balanced partnerships, some businesses still struggle to recognize and respect this dynamic. Since its introduction in 2021, Australia’s Payment Time Reporting Scheme (PTRS) continues to play a key role in encouraging transparency and fairness between businesses, particularly with large corporations and small suppliers.

Businesses failing to pay on time not only face financial penalties but also risk serious reputational damage. Recent examples from 2023 and 2024 show how late payments have tarnished reputations in sectors like manufacturing and retail. Some large, well-known businesses have faced criticism for delayed payments, underscoring the importance of maintaining timely financial practices to protect their reputation.

This highlights the importance of being transparent about and managing your financial supply chain. Additionally, leveraging tools like fairly-negotiated early payment discounts as an incentive to strengthen supplier relationships remains an effective strategy. Businesses that do this create better relationships with their suppliers, ultimately offering an added cash flow benefit to their client rather than a default payment choice.

It’s about the intention behind the incentive.

Good relationships are worth the investment

Beyond compliance and reputational risk considerations, businesses that foster close supplier-customer relationships stand to gain significantly. Building these relationships by taking the time to get to know your suppliers, their business goals and the way they operate, can bring a host of benefits.

These include:

simplifying complex negotiations
securing better deals
reducing quality control issues and delays
supporting new product or sales initiatives
improving efficiency
enhancing customer service

Together, these factors create a unique competitive advantage that is difficult for competitors to replicate.

How to build business relationships with suppliers

There are several ways to improve your relationship with suppliers and set the foundations for a long-term partnership, apart from discovering how supply chain finance works.

Choose suppliers with values that align to yours

Building strong relationships is easier when you work with suppliers whose values align with your own. For example, if your business prioritizes sustainability, partnering with suppliers offering eco-friendly solutions strengthens both the relationship and your brand’s commitment to these values.

Maintain clear, consistent communication

Clear communication is the backbone of successful partnerships. Misunderstandings or unclear expectations can lead to delays and friction, impacting customer satisfaction. Ensure communication is two-way and well-structured by:

Using accessible communication tools
Clarifying terms, standards, and expectations upfront
Scheduling regular touchpoints to address updates and issues

Consider cultural differences

Global supply chains now face new challenges, including geopolitical and cultural considerations. Understanding cultural sensitivities and business practices in your suppliers’ regions can help build rapport and avoid misunderstandings. When in doubt, local consultants or in-depth research can help navigate these complexities effectively.

Establish clear processes

Streamlined processes reduce errors, delays, and frustration for all parties involved. Investing in automation tools and digital platforms not only enhances efficiency but also signals your commitment to operational excellence. Clear financial processes, such as prompt payment systems, further solidify trust.

Reward loyalty

Loyalty is key to fostering long-term partnerships. Instead of focusing solely on the lowest cost, businesses are increasingly recognizing the value that responsive, high-quality suppliers bring. Rewarding loyalty with consistent contracts or exclusive opportunities strengthens relationships while contributing to your operational resilience.

Relationships first

In 2024 and beyond, strategic supplier relationships remain a cornerstone of business success, even as industries embrace rapid technological advancements. Building people-centered partnerships not only ensures smoother daily operations but also positions your business for long-term growth and adaptability.

By fostering collaborative, mutually beneficial relationships, you can create a unique advantage that allows you to thrive in an increasingly complex environment.

Interested in building stronger relationships with your suppliers? Get in touch today to discover how Octet can help.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

What is trade finance? A comprehensive guide

Posted on October 1, 2024January 21, 2025 by Russell Walsh

Australian businesses have traditionally been strong importers and exporters. As a nation, we exported $460.6 billion and imported $368.2 billion worth of goods and services in 2023.

For any business that trades internationally, cash flow can be a major stumbling block to success, particularly if they want to grow to service new markets. In fact, a lack of working capital can make even the strongest business stagnate. Do any of the following sound familiar?

You understand you need extra funding to grow, but you’ve exhausted all of the traditional funding options.
You’re confident your business will continue to flourish based on past performance, but you’re not sure how to best fund new opportunities.
You’ve borrowed all you can from your bank based on your personal or business assets, and you’re not sure where to turn next.

That’s where a trade finance facility can help. But what is trade finance? This form of funding works as a revolving business line of credit that gives you the working capital you need. It helps to plug financial gaps by immediately funding a transaction so your supply chain can continue uninterrupted. Trade finance can provide funding for new opportunities or help to shore up businesses that are feeling cash flow strain on supplier payments.

In this article, we dive into what trade finance is, the advantages of this type of facility, how you can work out if it’s right for your business and more.

The lowdown on trade finance

Trade finance is a well-established business funding solution. Globally, the trade finance market was valued at more than $15 trillion in 2024. In simple terms, trade finance is a business ‘line of credit’ facility that’s ideal if you buy from other businesses, whether they’re overseas or based in Australia. Trade finance is used in every industry, including retail, manufacturing, food and beverage, pharmaceuticals, healthcare, eCommerce and more.

Let’s face it – if you’re importing or even buying locally, you don’t want all your available cash tied up in paying for goods that can take weeks to arrive. And then you can’t even begin to make your money back until you have the items in stock and start selling them.

Trade finance funding works by bridging the gap between paying for your goods and recouping your money when you sell them to customers. This kind of financing gives your business quick access to funds by introducing a trusted financial partner, such as Octet, into your supply chain.

The high-level trade finance process is simple:

Your business purchases goods from your suppliers, either in Australia or overseas.
Your financier extends you a tailored line of credit to pay those suppliers immediately.
You then repay your financier with extended credit terms.

Without finance, the longer it takes between ordering/receiving the goods and making payment, the longer your working capital is tied up in the transaction. Trade finance helps bridge that general gap. As a buyer, it lets you pay your suppliers immediately and then repay the credit facility over time. As a seller, it allows you to get paid as soon as possible to keep your own cash flow healthy.

Advantages of using a trade finance facility

Businesses use trade finance to fund their business growth and to plug cash flow gaps. But what are the real benefits of using a trade finance facility over another form of funding? Here are our top four reasons.

Control your working capital

Choosing a business line of credit like trade finance over a traditional loan means you don’t have to offer your business or personal assets as collateral.

Traditional financial institutions usually demand asset security before they lend you money. So, if you’re short on personal/director’s assets, have maxed out your borrowing limit or don’t want to use your assets as collateral to begin with, your business can stagnate.

Trade financiers often lend based on the strength of your business’ balance sheet and the risk of the supply chain transactions, not on your personal assets. They examine your overall business and transaction values to determine your credit limit. That makes it easier to grow and scale your business as your sales increase. As your transaction values and profitability grow, so can your funding limit.

This benefit is significant if your business, industry or market is experiencing supply chain issues. Disruptions to your supply chain can widen your funding gap. With Octet’s Trade Finance facility, you can close this gap and provide your business with a cash flow advantage by extending your payables by up to 120 days.

With our intelligent solution, we pay 100% of supplier invoice values, including any upfront deposit requirement. When combined with interest-free terms of up to 60 days, you’ve got a flexible and powerful financing tool for your business.

Flexibility with global transactions

International trade is complex at the best of times, so anything that makes the process smoother has to be good for your business. Using a trade finance platform makes it easy to pay global suppliers using other currencies.

Currency fluctuations are an inherent risk in any international transaction. If the rate between the Australian dollar and your supplier’s currency changes dramatically overnight, you could suddenly owe a lot more than you’d budgeted. Trade finance can safeguard against these currency fluctuations by setting the exchange rate for the transaction upfront.

Our Supply Chain Platform gives you single-click payment across 72 countries in your choice of up to 15 currencies, which greatly reduces costly bank FX conversion fees and margins. Or you can bring your own third-party forward exchange contract to the transaction via our supply chain platform too. In just one click, you can authorise the payment, knowing that the FX is handled quickly and easily in a single, hassle-free step.

Early repayment discounts

Using a trade finance facility makes your cash available shortly after you receive your supplier’s invoice. This enables you to take advantage of any early settlement discounts your suppliers may offer (or you’re able to negotiate). This can ultimately save you money on your goods and services and allow you to repay your financier over a longer timeframe.

With the Octet Trade Finance solution, you can pay both international and domestic suppliers. And for those domestic suppliers, this can be related to invoices for goods or services. This flexibility allows you to use the funding and seek early payment discounts for a broader scope of supplier types and transactions than other funding options may allow.

Reduce global trading risk

Trading internationally always comes with an element of risk, and there are often few, if any, safeguards. If you’re an importer, there’s no guarantee that your goods will actually arrive. As an exporter, you risk not being paid on time, or at all, once you’ve sent the shipment.

A smart solution like our Trade Finance facility makes it easier and safer to trade, regardless of which side of the transaction you’re on. That’s because both the buyer and supplier are registered and linked to one another on the Octet Supply Chain Platform. Both parties to a transaction must sign up for the facility and be verified before it can proceed. We verify both parties to make sure they’re legitimate, which helps to significantly reduce these global trading risks.

The platform’s embedded claim and authorisation process also enables seamless communication between both parties. This ensures transparency and nullifies any payment dispute risk. It’s a win-win.

Is trade finance right for you?

As with any financial decision, it’s essential to do your homework and make sure both the financier and product are suitable for your business before applying for a trade finance facility. It’s important to ensure your finance partner has the reputation and experience to handle this type of finance securely.

The top four factors to consider when you’re researching trade finance solutions are:

Eligibility

Not all businesses are eligible for trade finance funding. A financier will base eligibility on factors such as size, industry and the business’ specific requirements. For example, our Trade Finance solution is open to profitable Australian businesses with an annual turnover of at least $3 million.

Costs

As with any financing solution, there’s a cost to using trade finance. That means you need to understand your profit margins and expenses so you can build the finance fees into your supply chain.

The cost of a trade finance product varies depending on the length of time you use it and the type of facility. But once factored into your budget, the facility fees can become a normal business cost.

Product suitability

Most financiers offer a range of products, but not all will suit your business. Do your research and seek advice on which product is best for you in your circumstances.

In addition to our Trade Finance product, we also offer Debtor Finance, Supply Chain Accelerate and OctetPay. You might find that a combination of these products may be the best fit for your business. In fact, by combining Debtor Finance and Trade Finance facilities on our Supply Chain Platform, we can give your business an integrated funding package. Incorporating both facilities gives you a back-to-back financing solution featuring:

a business line of credit to pay suppliers, with extended repayment terms (Trade Finance)
an instantly drawable funding source leveraged against your receivables (Debtor Finance).

This can simplify those periods of rapid growth, especially when you win new projects or contracts with initial expenditure requirements. With these solutions, you can leverage the increased sales revenue and mobilise that cash flow to close the funding gap.

Clear obligations

Most financial products can appear complicated when you start out, but they should have clear terms that they require both parties to follow.

Make sure you understand any obligations that come with the funding facility. If you’re unsure of anything, get your financier to explain exactly what you need to do to fulfil your obligations for their product.

Octet’s Trade Finance: close the cash flow gap

Octet’s Trade Finance facility gives you the power to bridge the cash flow gap. To be eligible, your business will generally need to have:

a turnover of at least $3 million
been trading profitably for at least two of the past three financial reporting periods
a positive balance sheet net worth
up-to-date ATO payments
current management and financial accounts.

The amount of funding you can access depends on your business. We’ll look at your most recent financials and management accounts to calculate a limit based on factors including:

your equity
your cash position
how profitable your business is.

Advantages of our Trade Finance facility

Close your working capital gap. We offer up to 120-day repayment terms and 60 days interest free, so you can pay your suppliers immediately and then repay us over time.
Unsecured. Our non-bank trade finance can be completely unsecured, meaning that we don’t require your real estate or personal assets as security to offer you finance. Alternatively, we also offer secured Trade Finance options.
Quick turnaround. You’ll get an answer to your finance application within days, not months. That’s much faster than traditional options.
Flexibility. You can use our finance either as your main funding source or to supplement traditional financing. So, if you want to diversify or your bank isn’t servicing your needs sufficiently, you can use trade finance as top-up funding.
Easy international trading. Our Trade Finance facility makes it easy to pay suppliers in more than 72 countries in a choice of 15 global currencies.
Secure platform and trading. We verify all members in our system to give you confidence that your trading partners are legitimate. Our information systems use best-in-class firewalls, encryption, hardware and procedures to keep your data secure.

How does our Trade Finance facility work?

Our Trade Finance facility has a simple workflow.

Submit your application. Apply online, and if you’re successful, we’ll approve you and give your business a facility limit.
Invite a trading partner. Add your domestic and international suppliers to the Octet platform. You don’t have to add all your suppliers to the system — just the ones you want to use the facility to pay. We’ll then ask them to enter their details so we can verify them.
Place your order. Add your order to the Platform. Our system will notify your supplier so they can accept the order. You can upload any documents needed for the transaction — such as the purchase order, invoice and bill of lading — through the Platform.
Authorise payment. Once the transaction is complete, you authorise the order and choose which funding methods you want to use to pay. This might be our Trade Finance facility, a credit card or a bank facility — or you could split the payment across multiple methods.

It’s that simple and safe. Our closed-loop Platform ensures the upload of all necessary documents, such as the bill of lading, before the order can be approved. That means you can be assured the transaction is valid before you pay.

How Octet’s Trade Finance accelerates business cash flow

Our Trade Finance facility helps you smooth out the cash flow fluctuations in your business.

For example, let’s say you sell sunscreen. As a seasonal business, you’ll need to order a lot of stock as the warmer months approach. Having a Trade Finance facility in place helps reduce the cash flow pressure that will build at that time.

Of course, regardless of the climate, other businesses may be flourishing and need extra cash to take advantage of opportunities for growth. In these cases, Trade Finance funding can provide a cash flow injection to help deal with demand.

This was the case for online wine retailer Vinomofo. The business had organically funded its growth without any debt since it began in 2011. But in 2020, when consumers moved to buying online during the pandemic, Vinomofo saw its opportunity to grow. Cash flow was good, but it needed a finance partner to take advantage of the deals on offer. Octet’s flexible finance allowed it to seize new opportunities faster than its competitors, which led to impressive and sustainable business growth.

Go Vita has also harnessed Octet’s Trade Finance. The health and wellness retailer was opening new stores nationwide and taking on new suppliers but wanted to preserve cash flow. The Octet Trade Finance facility allows them to do just that, and as Go Vita continues to grow, so too does the facility.

Discover if trade finance is right for you

No matter whether you need help to ride out the storm or fund exciting growth opportunities, trade finance will help your business power through.

Find out more about our Trade Finance facility and if it’s right for your business, or talk to us to find the best solution for your business needs.

Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

Financing trends: business game-changers in 2024 and beyond

Posted on September 30, 2024October 17, 2024 by Russell Walsh

The world of finance is evolving rapidly. Disruptive technologies, an increasingly connected financial landscape, and global uncertainty are challenging traditional finance models. The financing trends that have shaped previous years are evolving, while innovative new products are forcing businesses to rethink their approach to funding.

So, what are the trends in financial services that will shape the rest of 2024 and beyond? We explore six key trends that could change the way we all do business.

6 financial services trends in 2024 and beyond

1. Blockchain technology in financial services is on the rise

Blockchain technology, often associated with cryptocurrencies, extends beyond digital currencies to a range of industries and users.

In 2024, its application for supply chain management in small-to-medium-sized businesses is gaining traction. Blockchain-based invoice financing is transforming cash flow management by offering increased transparency, security, and efficiency, which can lead to a reduction in costs and a streamlining of processes.

“A prominent application of blockchain technology is decentralised finance,” says Octet’s Co-CEO, Brett Isenberg. “In traditional centralised finance, consumers and businesses borrow from a bank or via a broker. Decentralised finance challenges this by allowing peer-to-peer exchanges.”

While blockchain tech is currently used in the finance sector, Brett believes its use will increase exponentially in the years to come.

2. The industry is embracing AI and data analytics in financial services

Artificial intelligence (AI) and machine learning (ML), which provide insights and solutions at unprecedented speeds, are being used in tasks such as research and fraud detection. In 2024, there has been an even greater uptake of these tools with AI-driven supply chain management tools being used to help businesses predict disruptions, optimise logistics, and manage inventory more effectively.

“AI and data analytics have transformed the finance industry,” says Brett. “AI algorithms can analyse large data sets to identify anomalies that detect fraudulent activities and measure risks with greater accuracy than ever before.”

These technologies will also be increasingly used to enhance efficiencies, make decisions and improve customer service. “AI-powered chatbots and virtual assistants are getting better and better,” adds Brett. “The technology is also enabling more accurate and dynamic credit scoring by considering a much broader range of factors.”

3. Global growth has remained weak

In late 2023, the resilience of the global economy exceeded expectations, but global economic growth continues to face challenges in 2024. Political tensions, interest rate fluctuations, and economic policies are impacting financial services worldwide. China’s recovery has been weaker than forecast, global core inflation is rising, and high public debt continues in many countries. These factors had led the OECD to project lower global growth in 2024 compared with 2023.

In Australia, the Reserve Bank has kept interest rates on hold since November 2023, despite political pressure for cuts.

“This decision reflects ongoing concerns about inflation and economic stability”, states Brett. “Globally, many countries have cut rates to stimulate growth, but Australia’s unique economic conditions have led to a different approach.”

As such, businesses of all sizes must navigate these complexities to manage their cash flow and investment strategies effectively.

4. Increasing cybersecurity concerns

As financial transactions become more complex and frequent, cybersecurity remains a critical concern.

In 2024, Australia has seen a significant rise in data breaches, with notable incidents affecting millions of individuals. The Office of the Australian Information Commissioner (OAIC) reported a 9% increase in data breach notifications in the first half of 2024 compared to the previous six months.

Enhanced cybersecurity measures, such as multi-factor authentication and advanced threat detection, are essential to protect assets and maintain trust in financial services.

When combined with disruptive technologies such as AI and a shift to cloud-based systems, financial service providers will have to become more adaptable to protect their customers and offer the best services. Business leaders are being compelled to develop new strategies and explore innovation to counter challenges to security systems.

5. Innovative financial products are more readily available

While challenges are increasing, so too is innovation. The range of financial products available to businesses and consumers is growing, and as more businesses and consumers adopt digital solutions, new technologies and financial services have emerged.

“For example, a growing environmental awareness has increased the focus on sustainable financial products. So, there are now green bonds and sustainable investment funds,” says Brett. “Healthcare supply chain financing is an emerging area too.”

“Another innovation is the tokenisation of assets, which involves converting real-world assets into digital tokens on a blockchain. This has led to the creation of tokenised securities and other asset-backed tokens.”

6. Banks are being forced to embrace change

The banking industry is facing challenges from a slowing global economy, divergent economic conditions and disruption to their general business models. evolving financial landscape. Traditional banks must adapt amid higher interest rates, stricter regulations, climate change and technological advancements. Banks are now having to invest in robust platforms and adopt open banking requirements to collaborate with third-party providers. This shift is essential for improving customer service and engagement, helping banks retain important business customers.

“Traditional financial institutions have obviously been embracing tech for years, but it’s only in more recent times that it’s really pervaded certain products based upon business demand,” explains Brett. “At Octet, we have fundamentally changed the way buyers and sellers engage with each other on one platform — both in a local and international trading context. Traditional banks are also starting to invest in robust platforms and adopt open banking requirements to collaborate with third-party providers.”

Brett says banks are increasingly being forced to improve their customer service and engagement to retain important business customers.

The future of finance

Our innovative working capital solutions help you unlock the power in your business to thrive. Need a cash flow injection without the need for personal asset security? Our Debtor Finance facility allows you to convert up to 85% of your unpaid invoices into immediately available funding.

If it’s a revolving line of credit you’re after, our Trade Finance facility offers up to 60 days interest-free and 120-day repayment terms to pay local and international suppliers.

You can also unlock additional working capital to expand operations, acquire new assets or consolidate existing debt by activating an Octet Term Loan as part of your Debtor or Trade Finance facility.

Discover how Octet’s team of working capital specialists can help power your business growth today.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

Business forecasting: the key to success

Posted on September 30, 2024October 1, 2024 by Duncan Khoury

In an unpredictable business environment, forecasting is a crucial tool for businesses to navigate uncertainty and plan strategically.

In this article, we explore business forecasting, why it’s essential for managing risk and capitalising on opportunities, and how businesses use forecasts to make informed decisions. We also break down the steps to create a reliable business forecast and explore other ways to mitigate risk and maintain business stability.

What is a business forecast?

Business forecasting is the process of analysing historical data and using statistical models to calculate trends, foresee potential market condition changes and make informed predictions. This is invaluable for managing uncertainty and risk, particularly when preparing for seasonal and high-demand events like Black Friday and Christmas.

By leveraging accurate forecasts, businesses can ensure they have the proper inventory levels, allocate resources effectively and craft targeted marketing campaigns. This increases operational efficiency and profitability, turning potential uncertainties into growth opportunities.

Types of business forecasting

Business forecasting can be broadly categorised into qualitative and quantitative methods. Here are some examples:

Qualitative business forecasting methods

Businesses can use market research in the form of surveys, focus groups and interviews to gather insights directly from customers, suppliers or industry experts. This method helps forecast demand for new products and understand consumer preferences.

Scenario writing is another useful qualitative method. Here, businesses create different scenarios based on potential future events, such as economic downturns, new competitors or changes in consumer behaviour. They then analyse these scenarios and how they could affect operations.

The Delphi Method involves a panel of experts who provide opinions on future events. With the help of a facilitator, questionnaires and feedback sessions, the experts reach a consensus on likely outcomes. It’s useful for forecasting in areas with little historical data.

Commercial finance broker Dennis Horne from Equipmac Finance and Leasing says “When using qualitative methods to create a business forecast, it’s important to understand the quality of management, payment behaviours and the overall stability of key customers.”

Quantitative business forecasting methods

The moving average method uses historical data to identify patterns. By looking at various data points over a particular date range, you reach an ‘average’ data point, which you can then use to forecast future outcomes, such as market trends.

Regression analysis models help forecast the relationship between two or more variables. For example, a business might use regression analysis to predict sales based on variables like advertising spend, seasonality or other economic indicators. This method can also be used to understand the impact of pricing changes or promotional strategies.

Perhaps the simplest quantitative forecasting method, straight-line forecasting, assumes that future values will grow or decline at a constant rate based on historical data. It is often used for projecting sales, revenue or expenses over time when the growth rate is expected to be steady and predictable.

Whatever method you use, Dennis advises taking a risk management approach to forecasting. “This means taking into consideration the predictable or stable elements of business while accounting for potential changes in the economy or marketplace. It’s what Donald Rumsfeld called the known knowns and the known unknowns.”

Create a business forecast

Dennis has 42 years of business finance experience and says understanding your customers is critical to creating a reliable business forecast.

“Generally, 80% of your revenue comes from just 20% of your customers and it can be challenging to attract sustainable business from the other 80% of potential customers. So, with those 20%, it’s really important to assess the strength of those relationships, and whether they are going to continue to provide revenue for your business.”

Dennis adds that he always advises clients to use a forecasting method that considers customer behaviour.

Tips on creating a business forecast

Focus on collecting precise, relevant data, particularly historical sales data from past seasonal events. Understanding previous demand patterns helps to predict future sales and reduces the risk of overstocking. Complement sales data with market trends and key economic indicators for a comprehensive forecast.
Use forecasting templates and software to streamline the process. Templates provide a structured way to quickly input data, calculate trends and update forecasts.
Use forecasts to refine procurement strategies. Order stock well in advance where this is viable, and negotiate supplier payment terms based on expected demand. Accurate forecasting ensures optimal inventory levels, helping businesses avoid last-minute costs and manage stock more effectively. “The marketplace determines the price, so your efficiency is what will give you a better profit,” adds Dennis.
For events like Black Friday and Christmas, it’s essential to adjust procurement schedules to secure stock early, scale inventory based on forecasted demand and focus marketing efforts for high-demand products.
Review and adjust forecasts as new data becomes available. Regularly comparing actual results with forecasts allows you to stay responsive to the market.

Financial tools for success

A forecast is important, but it’s just one piece of the puzzle. An accurate budget and thorough business plan are also key. “The business plan is your guide on how to run your business,” says Dennis. “If it’s in the business plan, go ahead and do it. If it’s not in the business plan, then it could be a risk.”

How Octet supports businesses

By combining accurate business forecasting with Octet’s tailored financial solutions, businesses can strategically manage cash flow, inventory and more.

A reliable business forecast gives insights into expected cash flow fluctuations. Octet’s Trade Finance solution enables businesses to align their cash flow with these forecasts by offering immediate access to working capital with flexible repayment terms. It even allows you the opportunity to negotiate early payment discounts with suppliers, whilst ensuring that your goods and services are received as early as possible for resale or other purposes.

Forecasting helps businesses anticipate when expenses will exceed income. When that happens, Debtor Finance (also known as Invoice Finance) is an effective tool to manage cash flow. It uses your accounts receivables as capital to fund inventory, pay wages, seize growth opportunities and more, even when cash flow slows.

“Octet is a specialist in this field,” says Dennis, highlighting Octet’s competitive pricing, experience and deep understanding of financial markets.

A partner you can rely on

Effective business forecasting and utilising the right financial tools are key to success.

By leveraging Octet’s tailored financial solutions, businesses can improve cash flow, secure inventory, and enhance supplier relationships, ensuring they are well-prepared for future opportunities and challenges.

Explore how Octet’s suite of working capital finance and payment solutions can support your business by getting in touch today.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

Mastering your business budget: strategies for success

Posted on September 25, 2024November 20, 2024 by Duncan Khoury

A well-crafted business budget is essential for financial stability and informed decision-making in any organisation, small or large.

In this guide, we’ll explore the critical role of budgeting in managing your business’ finances and offer practical tips on how to create a business budget that aligns with your goals. You’ll learn how Octet’s working capital finance expertise can enhance your budgeting strategies, providing the cash flow support and tools to ensure your business thrives.

Why create a business budget

Financial coach, accountant and Healthy Business Finances founder Stacey Price^ has helped many businesses over her 20-plus years of practice. She’s often asked how to create a business budget and says a budget provides the structure every business needs.

“People think if there’s money in the bank, then the business must be doing okay, so they spend that money. Then they get hit with an unexpected ATO bill or a stock purchase invoice, and there’s no money to pay. It’s a slippery slope to cash flow disaster.”

Adhering to a well-structured business budget can stop that from happening. “A budget is like a GPS when travelling. It outlines your income goals and expense restrictions so your overall financial objectives are met. It guides you in the right direction and helps you make decisions about where to spend.”

A well-crafted budget allows businesses to:

set clear and measurable financial goals, which can guide your business growth strategy
facilitate better decision-making regarding investments, cost-cutting measures and growth opportunities
secure financing from banks, financiers and investors, which often require a clear budget to evaluate the financial health of a business.

A word about budgeting and forecasting

It’s important to distinguish between a budget, which outlines how much revenue a business expects to generate against its various expenses and a business forecast. A forecast is another essential business tool that estimates future financial outcomes based on historical data, current trends, and anticipated market changes.

How to prepare a business budget

Here are some practical tips to guide you through the process:

Set clear financial goals:

Begin by defining your short- and long-term objectives. These will inform how you allocate resources in your budget.

Identify costs:

Categorise your expenses into fixed costs (such as rent) and variable costs (such as utilities). Stacey says it’s also vital to identify non-essential costs (such as subscriptions and training in some cases) and essential costs (such as rent and salaries). “Essential costs are those that if you switched off tomorrow, you could not deliver your product or service. Non-essential costs are beneficial but not crucial. This distinction helps in understanding where you need consistent funding.”

Account for seasonal fluctuations:

If your business experiences seasonal variations in sales due to periods such as Christmas, or as a result of the fluctuating availability of stock or raw materials, adjust your budget to accommodate these changes.

Monitor cash flow closely:

Regularly track the inflow and outflow of cash to maintain a healthy cash position and prevent disruptive shortfalls. Monitor payment cycles, and consider negotiating better terms with suppliers or clients to ensure a more steady cash flow.

Plan for contingencies:

Set aside a portion of your budget for unexpected expenses or emergencies and factor in potential increases in fixed costs, such as rising rents. A contingency fund ensures your business can handle unforeseen challenges without disrupting operations.

Review and adjust regularly:

Monitor your cash flow to ensure you can meet your obligations. Then, review and adjust your budget regularly to compare actual performance against projections.

Use budgeting tools:

Leverage financial tools and business budget templates to streamline the budgeting process. Templates, such as those available from trusted sources like business.gov.au, software and tools can help you track expenses, improve cash flow, and manage different budget categories efficiently.

“When we discuss budgets with clients, we take a bottom-up approach,” says Stacey. “So we ask clients what their financial goals are for their business. We then look at the expenses. The income is the missing piece of the puzzle to make it all work.”

Working capital solutions: a smart budgeting decision

Securing financing is critical for most businesses, and you’ll need a well-prepared business budget to do this. “If you have some solid financials behind you and a business budget showing projected cash flow and profit, this will always work in your favour with banks and financiers,” says Stacey.

Even with a solid budget in place, maintaining financial stability especially when faced with fluctuating cash flow, can be challenging. By leveraging Octet’s range of working capital solutions, businesses can better manage their cash flow gaps and maintain financial stability. Here’s how Octet can help:

Bridge cash flow gaps: Even with careful budgeting, there are times when cash inflows may not align with outflows. Our working capital solutions provide the necessary funds to cover expenses during lean periods, ensuring your business stays on track.
Enable strategic growth: A strong budget outlines growth goals but achieving them often requires additional funding. Octet’s solutions support growth initiatives by providing flexible financing options that don’t disrupt daily operations and can work in conjunction with any existing bank facilities.
Customised to fit your budget: Every business has unique budgeting needs. Octet’s working capital solutions can be tailored to align with your financial goals and cash flow management strategies, enhancing your ability to adapt to changing circumstances.

Octet provides the solutions, including our Debtor Finance (also known as Invoice Finance) and Trade Finance facilities, to help your business manage cash flow, optimise spending, and plan for growth. When combined with effective budgeting practices, our finance solutions ensure your business is well-positioned to thrive.

A financial partner you can trust

Creating and maintaining a business budget is not just about numbers — it’s about planning for growth, making informed decisions and securing the financial health of your business.

By partnering with Octet, you can access expert financial solutions that help you stick to your budget and achieve your business goals. Get in touch with one of our working capital experts to find out more today.

^ Stacey Price is a financial coach, accountant and founder of Healthy Business Finances. Stacey specialises in financial coaching, management accounting, and cloud accounting training for business owners and entrepreneurs.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

How Octet empowered a homecare services company with working capital finance

Posted on September 19, 2024September 24, 2024 by Russell Walsh

In an industry where care is paramount, ensuring financial sustainability can often be a delicate balancing act. For an Australian homecare services company, this balancing act became increasingly challenging as the business expanded across the country. Despite a mission-driven approach to revolutionise in-home care, the company faced significant financial hurdles, particularly in managing cash flow. With the help of Octet Finance, this company was able to stabilise its operations and continue its vital work, demonstrating the critical role of working capital finance in supporting businesses in the health and aged care sectors.

Establishing the business and planning for growth

The company was established in 2016 with a vision to transform the homecare industry. Offering a broad range of in-home services — including personal care, companionship, assistive technologies, pet care, and transportation — the company aimed to help its members maintain their independence and quality of life. One of the company’s most innovative features is its technology-driven approach, which empowers members to monitor their health, track care schedules, and manage their expenditures.

However, as the business expanded rapidly across Australia into most major cities, it faced significant financial pressures. Despite a 50% increase in revenue from 2022 to 2023, the company had incurred losses for four consecutive years, reflecting the intense cash flow challenges typical in the aged care sector. Operating on a model where independent contracted carers set their own rates within suggested guidelines, the business found it difficult to balance affordability for members with fair compensation for the carers.

With the services increasing to over 35,000 in-home care activities per month – ranging from physiotherapy and nursing to lawn mowing and shopping services – one of the biggest challenges was cash flow management. The company needed to meet weekly operational expenses, but the monthly payments from the Federal Government’s Home Care Package Program created a significant cash flow gap.

Accessing working capital to ease cash flow pressures

Recognising that traditional lending solutions might not address these specific needs, the company’s commercial banking partner suggested exploring working capital finance options, particularly receivables financing, to bridge this gap.

Through the banker’s recommendation, the home care services company was introduced to Octet Finance’s Queensland Director of Working Capital Solutions, Allan Howe.

Understanding the business’s unique challenges and growth potential, Allan structured a $5 million debtor finance facility. Debtor finance, also known as invoice finance, allowed the company to unlock the value of its unpaid invoices, turning these future receivables into immediate cash. This was crucial for a business that operated on tight margins and relied on regular, timely payments to meet its obligations. With the influx of working capital, the company could cover weekly operational costs, including payments to carers and other essential expenses such as technology upkeep, marketing efforts, and administrative overheads.

“This solution provided the liquidity needed to manage weekly operational costs while waiting for the monthly government payments,” said Allan. “By smoothing out these cash flow fluctuations, the company could avoid the stress of having to defer payments to suppliers or delay critical investments in its growth.”

The impact of this working capital finance solution was immediate. With access to the necessary funds, the company could continue to pay the carers on time, maintain service quality, and support its ongoing growth. The financial flexibility provided by Octet’s facility meant that the business could focus on delivering high-quality care to its members without the constant strain of cash flow concerns.

Achieving the balance between financial stability and sustained growth

The partnership with Octet proved to be a turning point for the homecare services company.

“The stability provided by the debtor finance facility not only alleviated cash flow pressures but also allowed the business to sustain its growth across multiple regions,” explained Allan.

The availability of immediate funds allowed the business to confidently enter new markets, secure in the knowledge that it had the financial backing to support its growth initiatives. This included onboarding more carers, investing in advanced care technologies, and enhancing marketing efforts to attract new members.

The ability to consistently pay carers on time was particularly significant. In an industry where trust and reliability are paramount, ensuring that these independent contractors were compensated promptly helped maintain strong relationships and a high standard of care for members. This reliability, supported by the working capital facility, became a competitive advantage, allowing the company to attract and retain top-tier carers, further enhancing the quality of services provided.

The collaboration between the banker, Octet, and the homecare services company demonstrates how the right working capital finance solution can empower businesses to navigate financial challenges, sustain growth, and continue their mission-driven work. For this Australian homecare services company, Octet provided not just a financial solution, but a lifeline that enabled them to focus on what they do best — caring for their members.

Grow your business with Octet

Via our Referral Partner Program, Octet empowers businesses across a range of industries, including healthcare, labour hire and transport, offering innovative Debtor Finance and Trade Finance working capital solutions.

Speak to our team of working capital specialists to see how we can power your business growth today.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

Unlocking opportunity: business finance options every broker needs to understand

Posted on September 1, 2024December 11, 2024 by Duncan Khoury

Want to better support your SME clients? Managing cash flow is an SME’s number one priority — cash flow gaps can significantly affect operations and hamper growth. As a commercial finance broker, helping your SME clients identify, measure and bridge cash flow gaps will set you apart.

In this article, we’ll explore some key strategies and tips for managing cash flow. So let’s get started with some insights that brokers can use to proactively suggest tailored financial solutions that help to address cash flow challenges and drive business success for their clients.

Identifying cash flow gaps for your SME clients

Clearly, in order for you to offer solutions to your clients, you have to know what the key issues and opportunities are. Identifying cash flow or finance gaps and adding value to your existing service can really help strengthen your client relationships. And it starts by simply getting curious.

Dan Verdon, Octet’s NSW Director of Working Capital Solutions, says there are some simple questions you can ask your SME clients to identify any cash flow gaps:

Do you want to grow your business, or have you identified growth opportunities, but you can’t make it happen? “If the client is finding it difficult to grow to the next level, it might be because they don’t have the right finance in place,” says Dan. “Innovative working capital solutions can really help here.”
Are you finding you must turn away new business? “The client might tell you that they’re having to say no to orders or sales because they don’t have the working capital or the cash flow to actually service that customer or take care of those additional orders.”
Are your customers taking a long time to pay their invoices? “We often hear businesses complain that some of their customers take a long time to pay. They might be big businesses and good payers, but they take up to 70 days to pay. If you ask your SME clients what their average debt turn is and they say it’s beyond 30 days, that can cause cash flow issues.”

Business finance options

You’ve identified your client’s cash flow gaps and think a working capital solution might be the answer. So, is using debtor finance the best solution or is a trade finance facility the way to go? Could these solutions actually work together to help accelerate cash flow? Ask yourself, what is the best fit for my SME client and their unique supply chain and business requirements?

The good news for you is that there are solutions that can address these cash flow gaps. Today’s businesses have a range of finance products at their disposal, but beyond traditional forms of credit such as bank loans and credit cards, they might not fully realise their options.

Octet provides working capital solutions for SMEs across a range of industries. These solutions help improve cash flow and ensure the smooth operation of a business.

To explore growth opportunities

Debtor finance, also known as invoice financing, is a solution for businesses to access funds tied up in their receivables ledger without the need to use personal security or other collateral. It provides quick access to cash by leveraging unpaid invoices as an immediate cash advance.

A debtor finance facility can provide a robust solution where your client has a good business but encounters cash flow issues due to slow B2B payers.

With a debtor finance product, the financier will effectively lend against the business’ accounts receivable ledger and provide quick access to cash, bridging the gap between when invoices are raised and when they are paid. There’s generally no need for personal security or collateral.

When Skillforce Recruitment needed to overcome cash flow challenges to rapidly scale their operations, traditional financing options couldn’t provide the flexibility they required. The business came to Octet for a range of solutions, including a Debtor Finance facility that ensured predictable cash flow levels to meet payroll, manage operational costs, and seize growth opportunities.

“Octet’s got a proven history of facilitating growth for businesses,” says Dan. “Skillforce is a great example of that.”

To increase purchasing power

A trade finance facility could also be what the business is seeking. This revolving line of credit allows businesses to pay their suppliers quickly, mitigating some of the financial trade risks and allowing them to keep their supply chain moving smoothly. It also allows businesses to explore new trade opportunities.

“When you think of trade finance, many people immediately think of paying overseas suppliers. But it’s just as effective for paying domestic suppliers,” says Dan.

With trade finance, the financier pays suppliers immediately (which tends to keep them happy) and gives the business up to 120 days to repay.

Octet’s trade finance facility was the perfect solution for wellness retailer Go Vita. The business was increasing its number of suppliers and opening new stores but didn’t want its cash flow tied up in the process. The Octet facility allowed Go Vita to pay suppliers without delay while keeping its supply chain moving and the business growing.

Partner with Octet to power your SME clients

So, you’ve established that your client is interested in a working capital solution like a trade or debtor finance facility, but what’s next? Think Octet.

Unlocking a world of business possibilities since 2008, we have the experience to power a range of businesses across many industries. Our clients trust us to handle more than $4 billion in supply chain transactions every year.
We make it easy for commercial finance brokers, especially those who don’t work with these types of products every day. We structure the facility, help promote it to your clients, answer their questions whilst your brokerage reaps the rewards. Learn more about our Referral Partner Program, including the exclusive Qantas Business Rewards referral offer.
Our business clients choose Octet, and brokers refer their clients to us because we provide simple, fair and fast financing solutions. For example, with our streamlined Supply Chain Platform, businesses can track and manage every stage of their supply chain process, improving transparency and security for all parties.
We know your relationships are important, and we will keep you updated so you can continue to leverage the positive relationships you’ve built with your clients. Partnering with an established financier like Octet helps to cement your reputation and credibility.
The process is straightforward. Simply refer your client, and we handle the rest. After the initial meeting, you provide the business’ financials for our review. We’ll then walk your client through the recommended product and provide an indicative offer where appropriate. Once the offer is accepted, we settle the deal and get started. Your clients can then track, validate and authorise every stage of their transaction via our intuitive supply chain platform, enjoying all the benefits of having accelerated business cash flow.

Discover how to partner with Octet today

Octet partners with commercial finance brokers nationwide to help them empower their business clients. Do you have clients who could benefit from smarter working capital solutions? Get in touch with us today to discover how we can power your SME clients’ growth.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

Empowering a leading commodity trading business with tailored working capital

Posted on August 14, 2024September 4, 2024 by Russell Walsh

In the competitive world of commodities trading, maintaining a steady cash flow is essential for seizing new opportunities and managing everyday operations. With the pivotal advice and introduction by a commercial finance broker, Octet Finance supported a thriving business in the commodities trading and logistics sector, helping them overcome financial challenges and achieve sustained growth.

Identifying the financial challenge

Established in 2008, this business has steadily grown to become a leading player in the international trading of various agricultural commodities, as well as recycled paperboard, packaging and scrap metals. Their operations handle approximately 200,000 metric tons of grains, pulses, and oilseeds for export markets annually. With a robust procurement model that ensures full traceability from farm to mill, they have established long-term supply contracts with farmers and leveraged third-party warehousing in key port zones across Australia. This setup allows them to reduce costs and offer competitive pricing to customers worldwide.

Despite their success, the business faced a significant challenge: managing the cash flow required to support their rapid expansion. Their existing trade finance facility, provided by a more traditional financier, was no longer sufficient to meet their growing needs. They required additional working capital to continue their growth trajectory and maintain their competitive edge in the market.

Recognising the need for expert advice, the business turned to a trusted commercial finance broker. The broker, well-versed in the financial intricacies of commodities trading, quickly identified that the company’s existing financial arrangements were insufficient for their expanding operations. Understanding the business’s goals and financial structure, the broker recommended considering working capital finance as a solution to their cash flow issues.

The broker then introduced the company to Octet, who provided a tailored financial solution which proved to be a game-changer for the business.

Formulating a tailored financial solution

In considering the operational requirements of the commodities trading sector, Octet identified the need for a customised finance solution, providing the business with a $1m trade finance facility, specifically designed to address their working capital requirements. This facility enabled the company to manage their cash flow more effectively and seize new business opportunities without the constraints of limited funding.

Octet’s approach was not just about providing capital; it was about understanding the business’s unique needs and challenges. “By working closely with the company’s leadership, we tailored a solution that aligned with their operational model and growth ambitions,” says Brendan Green, Octet’s General Manager of Working Capital Solutions.

Transforming operations with additional capital

The injection of working capital from Octet had an immediate and transformative impact on the business. The trade facility was then increased to $4m to support its overall procurement requirements with a strategic supplier. The additional capital allowed the company to increase its acquisition of commodities, ensuring they could meet the growing demand from their customers. This expansion was crucial for maintaining their market position and continuing their growth trajectory.

With the flexibility provided by the financing, the business could manage its cash flow more effectively. This enabled them to pay suppliers promptly, secure better terms, and avoid the pitfalls of delayed payments that could disrupt their operations.

Improved cash flow and additional working capital also empowered the company to explore new business opportunities. Brendan adds, “They were able to enter new markets, diversify their product offerings, and establish stronger relationships with suppliers and customers alike.”

Additionally, the financial support from Octet strengthened the company’s overall financial stability. This was particularly important in a volatile industry where market conditions can change rapidly, and having a stable financial base made all the difference.

Planning for a prosperous future

The partnership with Octet marked a turning point for the business. With their immediate working capital needs addressed, the company could focus on strategic growth initiatives and long-term planning. They continued to leverage Octet’s expertise and financial solutions to navigate the complexities of international trading and maintain their competitive edge.

The role of the commercial finance broker was also instrumental in this success story. By understanding the business’s challenges and introducing them to the right financial partner, the broker facilitated a crucial connection that enabled the business to thrive.

Today, the business stands as a testament to the power of strategic financial support. Their story highlights the importance of having a financial partner who understands the unique challenges and opportunities of their industry. With Octet and their broker by their side, the business is well-positioned to continue its growth journey and achieve even greater success in the future.

Grow your business with Octet

Via our Referral Partner Program, Octet empowers businesses across a range of industries, including wholesale, manufacturing and transport, offering innovative Trade Finance and Debtor Finance working capital solutions.

Speak to our team of working capital specialists to see how we can power your business growth today.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

Understanding Working Capital Finance: A key tool for business growth

Posted on August 13, 2024September 10, 2024 by Russell Walsh

Working capital finance is a crucial business finance solution that helps organisations maintain adequate cash flow to effectively manage operational costs, invest in new distribution streams and expand into new products or markets without accessing their cash reserves. This type of financing addresses short- to medium-term needs, enabling businesses to cover essential expenses like stock, payroll, equipment and accounts payable. It can also assist businesses with accelerating the cash flow around their outstanding commercial invoices.

Commercial finance brokers play a vital role in helping businesses access working capital finance. These brokers facilitate various financing options to bridge gaps between cash inflows and outflows, especially during slow receivable periods or seasonal fluctuations. For commercial finance brokers, understanding the intricacies of working capital finance is crucial to advising business owners and financial decision-makers effectively.

When and how to access working capital finance

Working capital finance is primarily used by small-to-medium sized businesses across a wide range of industries, including retail, manufacturing, labour hire and healthcare services. These businesses often face cash flow challenges due to slow receivables, seasonal fluctuations, or the need to invest in greater inventory levels and more advanced equipment. Commercial finance brokers can identify and recommend the most suitable working capital finance solutions to meet their business client’s unique needs.

Dan Verdon, Octet’s NSW Director Working Capital Solutions, says that applying for working capital finance typically involves assessing the business’s cash flow needs and selecting the appropriate financing option. According to Dan, brokers support businesses in this process by evaluating their financial health, understanding the cash flow cycle, and recommending tailored funding solutions.

“For instance, a manufacturing company with a substantial accounts receivable might benefit from debtor finance, while a healthcare business importing medical consumables needing to pay overseas suppliers promptly will likely find trade finance more advantageous,” explains Dan.

Common types of working capital finance

Dan says it is important to understand the different types of working capital finance, how they work, and what’s best for the business’ situation.

“Navigating the various types of working capital is essential for optimising cash flow and ensuring supply chain management efficiency,” says Dan. “Understanding the best options for the business’ needs can enhance financial stability and provide a competitive edge.”

The various types of working capital finance include:

Debtor (Invoice) Finance: Access funds tied up in outstanding business invoices, providing immediate, personal security-free cash flow based on the accounts receivable.
Trade Finance: A revolving line of credit allowing businesses to pay their local and global suppliers quickly, improving cash flow and speed to market.
Term Loans & Asset Finance: Quick funding with fixed repayment schedules, ideal for immediate cash flow needs.
Trade Credit: Suppliers extend payment terms, allowing businesses to defer payments for goods and services, thereby managing cash flow more effectively.
Lines of Credit: Flexible access to funds up to a predetermined limit, allowing businesses to withdraw as needed.
Bank Overdraft: A short-term financing option that allows businesses to withdraw more money than is available in their account, up to an agreed limit.

The benefits of working capital finance

The benefits of working capital finance can be substantial. It improves cash flow, supports efficient operations, and enhances the business’s ability to seize growth opportunities. “By leveraging these financing options, businesses can maintain short-term stability and focus on long-term success, ensuring resilience and adaptability in a competitive market,” states Dan.

However, it is important to align the strategic implementation of supply chain financing with the requirements of the business. Some aspects to consider are:

Align financing with cash flow cycles: Ensure that the chosen finance solution matches the business’s cash flow patterns to avoid repayment stress.
Diversify financing sources: Utilise a combination of finance options to spread risk and maintain flexibility.
Monitor financial health: Regularly review the business’s financial performance and the total cost of any external finance facility to adjust strategies as needed.
Leverage relationships: Develop strong relationships with suppliers and financiers to negotiate better terms and rates

For commercial finance brokers, understanding and effectively communicating these aspects of working capital finance can have a significant, positive impact on the financial health and growth of their clients.

How to Calculate Working Capital

Understanding how to calculate working capital is fundamental for effective financial management. Working capital is the difference between a company’s current assets and current liabilities. The basic formula for calculating working capital is:

Working Capital = Current Assets – Current Liabilities

Current Assets	Cash and anything that can be converted into cash within a year, eg raw materials, accounts receivable, inventory, stocks, and bonds.
Current liabilities	Bills which are due to be paid within a year, eg accounts payable, payroll, tax, and overheads.

This formula provides a snapshot of a company’s short-term financial health and operational efficiency. Positive working capital indicates that a company can cover its short-term liabilities with its short-term assets, which is crucial for maintaining smooth operations and supporting business growth.

Octet Working capital solutions – powering business growth

Octet’s tailored working capital financing and payment facilities help businesses effectively manage their cash flow and facilitate sustainable growth. With Octet, businesses can:

access a flexible line of credit to power business trade
leverage unpaid invoices to access fast working capital
expand business operations with a flexible, tailored loan
use existing credit or debit cards to pay suppliers
streamline payments and take control of the supply chain.

We offer a comprehensive suite of financial solutions to empower businesses with the capital they need to thrive.

Debtor Finance

This solution helps manage cash flow by providing immediate access to up to 85% of unpaid business invoices, without the need for personal asset security.

Trade Finance

Set flexible supplier payment terms with up to 60 days interest-free and 120 days repayment, whilst enjoying bank-beating FX rates.

Term Loan

Flexible finance for a range of business needs including investment in new assets, consolidation of loans or equipment purchase.

Octet Pay

Use business credit cards or other payment sources to pay any invoice. Benefit from market-leading FX rates when paying international suppliers.

Supply Chain Accelerate

A fast and flexible solution that pays 100% of supplier invoices with up to 90 days to repay.

Supply Chain Management Platform

Our innovative digital platform makes it easy to track, validate and authorise across each stage of a transaction.

Discover how to partner with Octet today

Octet is committed to supporting businesses through tailored financial solutions, helping them understand their cash flow and funding options and ensuring they are well-positioned to seize growth opportunities. If you’re a business decision-maker and want to know more, get in touch with the team today.

Or if you are a commercial finance broker with clients who could benefit from smarter working capital solutions, our Referral Partner Program empowers businesses across a range of industries with innovative working capital solutions.

Speak to our team of working capital specialists today to discover how we can power business growth.

Industrial expansion: Leveraging working capital finance for strategic growth

Posted on July 24, 2024September 27, 2024 by Russell Walsh

In the dynamic commercial landscape of regional Australia, a company operating in industrial insulation, cladding and roofing was on the brink of transformation. The company’s comprehensive service portfolio catered to a diverse range of industries, specialising in thermal insulation and fabrication. However, to stay competitive and meet the growing demands of their clientele, they needed to expand their operations and enhance their capabilities.

The key to unlocking their potential lay in securing adequate working capital finance. As such, the company sought a partnership with Octet to support their growth ambitions.

Boosting cash flow with debtor finance

Working with Octet’s Director of Working Capital Solutions, Dan Verdon, they identified debtor finance as a crucial component of their financial strategy that provided the company with the liquidity needed to manage their cash flow effectively. By leveraging their accounts receivable, they converted outstanding invoices into immediate working capital. This influx of cash enabled them to meet day-to-day operational expenses without delay, ensuring the smooth running of their business.

“The Debtor Finance facility was a game-changer,” said Dan. “It enabled the company to bridge the gap between invoicing and payment, reducing the stress associated with cash flow management.”

The initial requirement was for a $1.4m Debtor Finance facility. With steady cash inflow, the company could now focus on scaling their operations rather than worrying about payment delays from clients. It allowed them to tender for larger jobs, which triggered Octet to apply an immediate facility increase to $2.0m.

Empowering expansion through trade finance

Trade finance complemented debtor finance by addressing the specific needs of purchasing raw materials and equipment from suppliers. The $100,000 Trade Finance facility provided the necessary funds to secure critical inventory and equipment on favourable terms. This allowed the company to maintain a steady supply chain and meet the demands of their growing project pipeline.

By utilising trade finance, the business could negotiate better deals with suppliers, taking advantage of bulk purchasing and early payment discounts. This not only reduced costs but also ensured they had the materials needed to deliver projects on time and to the highest standards.

Dan states, “The client was particularly pleased with the unique feature Octet offered that enabled them to pay their current ATO debt through their trade facility.”

New investments in technology and equipment

One of the significant ways the company leveraged their working capital funding was through investment in state-of-the-art equipment and technology upgrades. The infusion of funds allowed them to purchase advanced machinery that enhanced productivity, efficiency, and safety. With cutting-edge tools at their disposal, the team could tackle complex projects with greater precision and speed.

These technological advancements positioned the company as a leader in their field, enabling them to deliver superior results to their clients. The ability to stay ahead of industry trends and continuously improve their service offerings became a competitive advantage.

Expanding the workforce and service offerings

Financing also played a pivotal role in expanding the company’s workforce. With the financial flexibility provided by debtor and trade finance, they were able to hire skilled professionals across various disciplines. The expansion of their team allowed them to take on more projects simultaneously, increasing their service capacity and ability to meet client demands.

Moreover, as market dynamics evolved, the company recognised the need to diversify their service offerings. The availability of working capital enabled them to explore new avenues and introduce additional services, such as asbestos removal. This diversification not only opened up new revenue streams but also made the company more resilient to market fluctuations.

Pursuing growth opportunities

The strategic use of working capital finance facilitated the company’s growth ambitions. With enhanced cash flow, upgraded equipment, and an expanded workforce, they were well-positioned to pursue larger and more lucrative projects. Their ability to deliver comprehensive solutions across various industries attracted new clients and strengthened relationships with existing ones.

Overall, the application of a Debtor Finance facility and a Trade Finance facility empowered the company to overcome financial constraints and drive business growth. By leveraging these financing options, they achieved operational excellence, expanded their service offerings, and positioned themselves as a dynamic player in the industrial sector.

“The story of their transformation serves as a testament to the power of working capital finance in unlocking a business’s full potential,” concludes Dan.

Grow your business with Octet

Via our Referral Partner Program Octet empowers businesses across a range of industries, including construction and engineering, manufacturing, transport and labour hire, offering innovative debtor finance and trade finance working capital solutions.

Speak to our team of working capital specialists to see how we can power your business growth today.

Disclaimer: These comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.

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