Business Finance Archives | Page 5 of 5

Trading Partners – take control of your trading relationships

Posted on May 6, 2020May 20, 2024 by Duncan Khoury

As part of Octet’s ongoing commitment to improving the functionality and experience offered to members via our market-leading supply chain platform, we’re proud to introduce our latest innovation…

Octet’s new trading partners functionality essentially gives you the power to manage all your trading relationships from one location. Specifically, it:

Enables you to send and manage invitations to the Octet platform, thereby self-managing your trading relationships
Allows you to start trading and transacting far quicker than was previously possible
Uses a new design framework which allows you to effortlessly search, filter and sort your partners

This is just another example of the Octet platform powering flexible trading relationships and solutions for businesses, with more innovations to follow in the near future.

If you are interested in further details about either of these exciting features, please speak with your Client Relationship Manager or simply email support@octet.com

Power your customer collections and cash flow

Posted on April 17, 2020May 20, 2024 by Duncan Khoury

In these most difficult economic conditions it makes sense to offer your customers the widest possible range of payment options.

That’s why Octet have partnered with AccountsPay to provide a multi-source payment platform for your customers to seamlessly pay their accounts.

This is a free service to you as a valued member of Octet to further enhance and streamline your customer collection process.

Benefits of AccountsPay for your business:

An efficient and easy payment option for your customers
Competitive fee structure on all credit card payments – speak to your Octet account manager to find out more
Removes all the onerous rules associated with credit card receipts
Manages and streamlines your debt collection process

With AccountsPay your customers can:

Make payment with their credit card (Amex, Visa and Mastercard), via bank transfer or a combination of both
Maximize cash flow by utilising interest free periods
Centralise and manage outstanding invoices
Earn valuable reward points for every dollar paid through your credit card provider
Select to fully or part pay any invoice

It’s quick and easy to get started – your customers can be pre-registered onto the platform and once logged in – they’re ready to start efficiently paying you!

How to get your customers started

Promote AccountsPay on your existing invoices (your Octet Relationship Manager will provide you with our templates)
Provide us with a list of your nominated customers and we’ll register them to AccountsPay on your behalf

To discover how AccountsPay can power your customer collections and cash flow, please call 1300 862 838 to speak with one of our Client Relationship Managers.

How does Trade Finance work?

Posted on April 14, 2020May 20, 2024 by Duncan Khoury

Traditionally, Australia is both a strong importer and exporter. According to DFAT, our 2018-19 exports were worth AUD 470.2 billion, while our imports were worth AUD 421.4 billion.

For any business that trades, cash flow can be a major stumbling block. Trade finance can help to plug the gap by immediately funding a transaction so the supply chain can continue uninterrupted.

Even in the current uncertain times, trade finance can help to shore up businesses that are feeling the strain – or provide them with funding for new opportunities.

But how does trade finance work? Let’s examine it in more detail.

What is trade finance?

Trade finance is a business ‘line of credit’ funding facility that’s ideal if you buy from (or sell to) other businesses, whether they’re overseas or local. As a buyer, it lets you pay your supplier immediately, then pay back the credit facility over time. As a seller, it simply allows you to get paid quicker.

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. You can’t even begin to make your money back until you have the items in stock and start selling them. So if you have to pay out a large sum upfront, how do you smooth over that cash flow gap?

Meanwhile, as an exporter, you need to get paid as soon as possible to keep your own cash flow healthy. The longer it takes between sending the goods and receiving payment, the longer your working capital is tied up in the transaction.

That’s where trade finance funding can help.

Trade finance works by introducing a third party financier into your transaction. This financier puts up the money to pay the supplier, then lets the buyer (your business) repay it with extended credit terms.

This gives you working capital to keep your business running while the goods are in transit.

Other advantages of using a trade finance facility

While plugging the cash flow gap is a major reason that many businesses decide to use trade finance, it also has other advantages.

Reduce global trading risks

International trade transactions carry a lot of risk, and have few (sometimes no) safeguards. If you import goods, you can never be guaranteed that those goods will actually be delivered. If you export, you risk not being paid for your products.

Using an intelligent trade finance solution as part of your supply chain can make it easier and safer for you to trade.

Both parties to a transaction have to sign up for the facility and be verified before it can go ahead. Having the financier check both parties to make sure they’re legitimate first, helps to significantly reduce these global trading risks.

Reduce currency fluctuation risks

Another inherent risk in any international transaction is constantly shifting exchange rates. If the rate between the Australian dollar and your supplier’s currency changes dramatically overnight, you could find yourself suddenly owing a lot more than you’d budgeted.

Trade finance can guard against these currency fluctuations by setting the exchange rate for the transaction upfront.

Save money on early payments

If you’re importing, having cash immediately available lets you take advantage of any early settlement discounts your supplier is offering. That saves you money on your goods and services, and allows you to pay the money back over a longer time frame to your financier.

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:

turn over at least AUD 3 million
have been trading profitably for at least two of the last three financial reporting periods
have a positive balance sheet net worth.

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 your business’s tangible net worth, including factors like:

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 payment terms, so you can pay your suppliers immediately, then pay us back over time.
Unsecured. Our non-bank trade finance is completely unsecured. We don’t use your real estate or personal assets as security to offer you finance.
Quick turnaround. You’ll get an answer to your finance application within days – not months. That’s much faster than with traditional options.
Flexibility. You can use our finance either as your main funding facility, 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 over 68 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 partner is legitimate. And our information systems use best-in-class firewalls, encryption, hardware and procedures to keep your data secure.

How does Trade Finance 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 you 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 for. 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 system.
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 system 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 can grow your business

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

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

Plus, in uncertain business climates, many businesses are under strain and need cash flow to survive day-to-day. Octet’s Trade Finance solution can help to plug the cash flow gap that results from a market slowdown.

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.

Power to fund your business

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 or talk to us to find the best solution for your business.

How does supply chain finance work?

Posted on March 31, 2020May 20, 2024 by Duncan Khoury

A strong cash flow is one of the most important factors in making your company successful, but that can create a serious challenge in some trade relationships.

Traditional finance methods for managing cash flow are often too expensive or inflexible for many businesses. Supply chain finance is an alternative finance method that provides short-term funding to improve your working capital.

This financing method protects the supply chains of medium-to-large Australian business by introducing a third party into the buyer-supplier relationship.

Let’s look in-depth at how supply chain finance works.

What is supply chain finance?

It’s an unfortunate reality of business that each party in a trade relationship often has conflicting goals. They’re each concerned with their own business’s cash flow however, which means the supplier wants their money quickly, while the buyer generally wants to postpone payment for as long as possible.

Introduce a complex supply chain like manufacturing or retail into the mix, where suppliers are also buyers, and the potential problems multiply.

Supply chain finance is a smart financing option that offers buyers and suppliers an opportunity to work together to stabilise both parties cash flows. It introduces a financial intermediary – a third party – into the buyer-supplier relationship.

Think of supply chain finance as an innovative hybrid of trade finance and debtor finance. The third-party financier almost immediately advances the money that the buyer owes to the supplier, ensuring that the supplier receives payment as soon as possible. They later recover that money from the buyer, allowing the business to benefit from longer payment terms.

As a result, the financier effectively stabilises the entire supply chain.

But how exactly does supply chain finance work?

How the supply chain finance process works

The supply chain finance process is simple. It starts when the buyer enters into a supply chain finance agreement with a third-party financier. After this:

The supplier invoices the buyer as normal
The buyer approves the invoice as correct
The supply chain financier pays the supplier soon after it’s approved
The buyer then pays the financier up to 120 days later, as agreed by both parties

This means that the supplier doesn’t have to wait for the full payment term before they get their money. And that, in turn, means they can pay their own suppliers on time.

In short, the whole supply chain runs without cash flow bottlenecks.

Supply chain finance: what’s in it for you?

Supply chain relationships are often uneven in terms of the power each party has in the transaction.

For example, larger buyers (such as big supermarket chains) can put smaller suppliers at risk of cash flow shortages by dictating longer payment terms. Meanwhile, small buyers may struggle with liquidity, and risk letting unpaid invoices fall overdue, which can then impact the entire supply chain – small, medium and large businesses alike.

Complex supply chains and global trading relationships can exacerbate the problems. Time delays with cross-border transactions or late payments can have a domino effect across the whole supply chain.

Supply chain finance can strengthen the entire chain for both buyers and suppliers.

How does supply chain finance help buyers?

Generally, the buyer is responsible for establishing supply chain finance. So why would they want to do that?

As a buyer, paying upfront for high-value goods or services can be a big hit to your cash flow. Using supply chain finance helps you to:

save money by taking advantage of any early payment discounts
still trade as usual with the cash you have available
maintain a better relationship with your supplier, which strengthens the stability of your supply chain.

Additionally, a supply chain finance facility is also generally considered an ‘off-balance sheet’ source of funding, which means it doesn’t generally affect your ability to access other traditional funding sources, such as bank loans.

How does supply chain finance help suppliers?

As a supplier, using a supply chain finance facility means you:

get paid earlier
improve your balance sheet by lowering your accounts receivables
can piggyback on a larger buyer’s credit rating, taking advantage of the favourable terms they’ve negotiated.

Put simply, supply chain finance has advantages for both suppliers and buyers, and reduces risk along the whole chain.

Octet’s Supply Chain Accelerate: a revolutionary working capital solution

We’ve designed our Supply Chain Accelerate solution to provide buyers with supply chain financing that they can then use with specific sellers.

Is Supply Chain Accelerate right for you?

Ideal buyer businesses are highly profitable with a larger turnover. To show this, you’ll need to provide a copy of your recent, audited financials, which we’ll check against our internal credit rating.

If you’re approved, here are just a few ways Supply Chain Accelerate can give your business a boost.

Quick setup

We have a fast setup process for both buyers and sellers. From the initial assessment to underwriting and on-boarding to go live, it typically only takes a few weeks.

Unsecured funding

Unlike more traditional financing, Supply Chain Accelerate is completely unsecured. That means we don’t require director or company guarantees. Instead, you secure all finance against your business performance.

Flexible finance

Supply Chain Accelerate doesn’t have to be your only finance source. Use it to supplement other existing or planned funding facilities. If you need extra finance to top-up on an existing loan, you can do that. And since we take on the liability to your supplier, it doesn’t sit on your balance sheet, so it won’t interfere with applying for other finance.

Global security

We vet both you and your suppliers against global banking standards. We also carry out all transactions securely, keeping your data safe and using anti-fraud technology. This level of security gives you extra peace-of-mind in your supply chain.

Increased visibility

Our secure platform enables you to track each critical step in the supply chain process – from procurement to payment, and from order to cash. The platform also stores and validates all essential documents at each stage, giving both buyer and supplier full transactional visibility.

Cost splitting

You can choose to pay the Supply Chain Accelerate cost yourself, have the other party pay it, or split it between both businesses.

How Octet’s Supply Chain Accelerate can grow your business

Supply Chain Accelerate recently helped a domestic fashion clothes supplier that had an outstanding ledger of $5 million. The company had one main buyer and a good credit rating, but cash flow bottlenecks were stopping them from growing their business.

A competitor had offered this client debtor finance of up to $2.5 million with an 80% advance rate. However, since the company was a good credit risk, Octet offered them the full $5 million finance at 100%.

We on-boarded their main buyer, and as soon as they were authorised, we funded the business 100% of the claimed amount, minus our transaction fee. The buyer then had 90 days to repay us, effectively giving them an extension of credit.

And since our funding was more than double the amount of our competitor’s, our client had the cash flow to effectively double their revenue within the next 12 months. As a result, their net profit after establishing the supply chain finance facility significantly increased.

Negotiate smarter

Supply chain finance can help you to improve your cash flow, strengthen your supply chain and power your business growth. But we also have a range of other finance solutions that may suit your needs.

Discover more about Supply Chain Accelerate or talk to us today to see which solution will work best for you.

The comments and views in this communication are those of the author as at the date of this post and are subject to change without notice. This communication should not be construed as advice and you should act using your own information and judgment. Whilst 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.

Invoice factoring vs invoice discounting: what’s best for quick cash flow?

Posted on March 31, 2020May 20, 2024 by Duncan Khoury

Alternative forms of business finance like quick invoice factoring and invoice discounting are growing in popularity. In fact, the 3rd Asia Pacific Alternative Finance Industry Report found that ‘invoice funding’ was the third-largest type of alternative funding in Australia.

There are two main types of invoice funding: invoice factoring and invoice discounting. Both give you quick access to funding to improve your cash flow, but the main difference lies in who collects the invoice payments.

Let’s take an in-depth look at both invoice factoring and invoice discounting, so you can see which is right for your business.

What is invoice factoring?

Strong cash flow is essential for running a successful business. Having sufficient cash available:

lets you maintain good relationships with your suppliers, since you have the funds to pay them more quickly
saves you money by letting you access any early supplier payment discounts
lets you take advantage of opportunities for growth.

Invoice factoring helps you improve your cash flow. It’s a type of debtor finance that uses your accounts receivables to free up working capital. It means you get access to the money you’re owed from your customers quickly, without having to wait for them to pay.

With invoice factoring, you sell your accounts receivable to a financier. In exchange, they give you up to 85% of the value of the invoices upfront – quickly and easily.

From there, the financier becomes responsible for collecting the debt. It’s up to them to collect payments from your clients and process them.

Once they’ve collected payment, they pass the rest of the money onto you, minus a small fee.

That means invoice factoring can help eliminate any cash flow blockages.

What is invoice discounting?

Invoice discounting (also known as receivables discounting) is similar to invoice factoring, with one key difference. With invoice discounting, the financier doesn’t take on the responsibility of collecting the debt. Instead, that stays with you.

So which option is better for you as a business? Let’s compare the two.

Invoice factoring vs invoice discounting

Here are some points to consider when you’re comparing factoring vs discounting your receivables.

Invoice factoring

Quicker and possibly more cost-effective: since you pass the responsibility of collecting payment over to the financier, invoice factoring is quick and saves your company time and perhaps wages. On the other hand, you forfeit some control over your day-to-day operations.
More expensive: invoice factoring companies generally help with sales ledger management such as allocating payments, sending statements and reminder letters. The associated fees are often higher than with discounting, since the financier does more work.
More obvious: your customer knows you’re using a financing facility, since they need to deal with your financier. Knowing this may make some clients wary of doing further business with you.

Invoice discounting

You retain more control: with invoice discounting, you manage your sales ledger, which means you keep control of a significant aspect of your business.
Smoother cash flow: rather than operating on an invoice-by-invoice basis, invoice discounting usually works with your ledger balance as a whole. This lets you smooth out any cash flow ‘ups and downs’ you may have over the period.
More discreet: invoice discounting also lets you keep your funding confidential from your clients. They won’t know that you’re using a short-term financier.

Whichever method you choose, both invoice factoring and invoice discounting let you tap into your accounts receivables to keep your cash flow smooth and your business growing.

Octet’s Debtor Finance: grow smarter

Octet’s Debtor Finance facility lets you convert up to 85% of your unpaid invoices to cash within 24 hours.

But is it the right funding choice for you? It might be a good fit if your company:

offers longer payment terms to buyers
is seasonal
contracts to large corporations who can set their own (longer-than-average) payment terms.

Debtor finance gives you the cash flow to pay suppliers, buy equipment or expand your business. Because it’s based on your ledger balance, the amount of finance you have available generally grows as your business does.

Unlike many other types of finance, you don’t need to provide security like property. So if you’re a business owner who doesn’t have personal property, or your assets don’t have enough available equity, debtor finance may be your best option.

It’s flexible enough that you can use it as your primary source of funding, or only for top-up funds. And because it doesn’t appear on your balance sheet, it doesn’t interfere with existing or future loans.

Octet’s Debtor Finance is available to businesses that range from newer companies to those that are well-established. Ideally, we like to see a turnover of at least AUD 1 million, with 1-2 years of business experience (but don’t hesitate to talk to us anyway if you’re turning over $500,000 or more, as we may be able to help).

Power your growing business with Octet’s finance options

Invoice factoring and discounting are just two ways you can give your business a boost via alternative finance. The right method for you will depend on factors like how big your business is, what your assets are and the amount you need to inject.

At Octet, we can finance all kinds of business. Talk to us today to discover how we can power your business growth.

How does debt factoring improve cash flow?

Posted on March 1, 2020May 20, 2024 by Duncan Khoury

No matter the size or type of your company, managing cash flow is essential, and often difficult. Many businesses need help in the form of financing to smooth out their cash flow cycles.

Debt factoring is an increasingly popular form of funding for Australian businesses. It basically involves ‘selling’ your accounts receivables in exchange for fast access to cash.

But how does debt factoring work? And how can it improve your cash flow? Read on to find out more.

How does debt factoring work?

Debt factoring is a way to fund your business by using the largest asset your business has – your accounts receivable.

It works by ‘selling’ your outstanding customer invoices (accounts receivable) to a debt factoring company. The company, known as a financier, ‘buys’ those invoices for up to 85% of their value which you can then use immediately in your business, rather than waiting for your customer to pay. Your financier then collects the full invoice payment from your client and pays you the outstanding amount, minus whatever they charge as their fee.

Why debt factoring is so powerful

It’s not hard to see how debt factoring can help your business with cash flow.

After all, imagine if your customers paid you within 24 hours of receiving their invoices.

Think about what you could do with your business:

Where could you take it?
How many more opportunities for growth could you take advantage of?
What financial benefits could you take advantage of by paying your suppliers faster?

Having your funds in your bank account within a day gives you essential working capital. You can use it to pay expenses – or as base capital to fund business expansion. Imagine the possibilities!

Of course, in the real world, your customers just aren’t going to pay you within 24 hours. They’re all managing their own cash flow, so it’s almost never in their best interests to pay your invoices early. But that net effect – up to 85% of your invoices paid up front – is essentially what debt factoring provides.

In essence, debt factoring opens up more finance, more quickly, than you can achieve by any other business funding means.

How does debt factoring improve cash flow?

Debt factoring improves cash flow by giving your business significantly faster access to revenue owed to you.

It means you never have to wait the full term of your invoice to get your cash. And that’s important, because waiting 30, 60 or 90 days to be paid can put a severe strain on your business. In fact, of the 8,000+ companies that declared insolvency in 2018/19, more than half – 51% – reported inadequate cash flow as the reason.

That’s not surprising, given the average time taken to pay invoices by Australian businesses is 33 days. Sadly, the average time it takes big businesses to pay small businesses is even worse. So consider how powerful it would be to get your money almost immediately via debt factoring. Then it’s there and available for you to:

pay your bills and business expenses (e.g. wages, rentals, tax and insurances)
buy supplies or equipment
grow your business… without that extended wait.

Without instant access to the money locked up in your accounts receivable, however, you need to fund all of the above from your profits or working capital. That means that – unless your cash flow is particularly strong from other sources – your business can’t grow. You can’t take on new work and opportunities if you don’t have the cash flow to support them.

It’s also important to realise that cash flow isn’t something you can sort out once and never think about again. Running a successful business means maintaining a strong, steady cash flow over time. Luckily, debt factoring isn’t just a one-off loan. It gives you ongoing access to cash flow, like a line of credit. As you raise more invoices, you have access to more cash.

Let’s say you made $500,000 worth of sales in January. Debt factoring would give you up to $425,000 of that almost immediately. If you then took on new contracts, won new customers and increased your sales to $600,000 in February, your available amount would rise to up to $510,000, depending upon the agreed facility size.

This more immediate cash flow benefit can help to accelerate your business growth, which in turn could lead to more available cash flow.

Other advantages of debt factoring

Improved cash flow isn’t the only advantage of debt factoring. It also provides:

A flexible alternative to traditional financing. Traditional funding methods like loans and overdrafts generally require some form of security – usually property or other assets. That may not always be an option, especially if you don’t own property or have little equity to leverage. Alternative finance options like debt factoring don’t require directors’ personal assets as security. Your business simply funds itself and grows in line with its receivables.
Freedom from stress. Don’t underestimate the positive impact on your mental health of no longer having to stress about cash flow. An MYOB survey found an unacceptable 52% of business owners have experienced increased stress and anxiety due to late payments and the cash flow issues they cause. Debt factoring can allow you to focus on planning your business, rather than fighting cash flow fires.

How much does factoring your accounts receivable cost?

You may be thinking that all this ‘factoring your accounts receivable’ sounds great… but how much will it cost?

There’s a perception that it’s expensive, but the reality is that the cost is on par with bank finance (without the personal security constraints) – and far less than any credit cards you use to smooth out your cash flow.

The actual fees vary, depending on several factors like:

your sales volume
the industry you’re in
how stable your business is
what payment terms you use
how creditworthy your customers are

We can help you to understand the fees if you’d like to discuss your options.

How can Octet help my business’s cash flow?

At Octet, we have a range of flexible financing solutions to suit different businesses, including Debtor Finance, Trade Finance and Supply Chain Accelerate.

All of these financing solutions can be used as your primary funding source or to supplement other funding sources like bank loans. And since they aren’t generally classed as ‘debt’ from an accounting standpoint, they don’t affect your ability to access more traditional funding methods.

Our most flexible option for businesses that are growing fast is Debtor Finance.

Is our Debtor Finance facility right for you?

Do you have a growing business, with great ambition and potential? Have you been trading for at least 6 months to 1 year, with a minimum AUD 1 million turnover? (That said, we can also look at start-ups, depending on your history). If so, you might be eligible for Debtor Finance.

Like many growing businesses, you may be facing cash flow challenges or looking to recapitalise so you can free up your cash flow. You may want to inject that cash into your business to make more sales, and – in turn – generate more profits. Does that sound like you?

Then, Octet’s Debtor Finance facility could be your answer. It gives you access to funding that increases as your business grows, so you can accelerate your growth and take advantage of new opportunities.

We’ve seen clients grow over just a few years from having a $100,000 Debtor Finance facility to $4 million, powered by the more flexible cash flow our Debtor Finance solution gives them.

Unlock the power of your receivables and improve your cash flow

Find out more about Debtor Finance today.

5 Ways to Become More Influential in Business

Posted on May 31, 2019May 20, 2024 by Duncan Khoury

Octet’s latest deep-dive guide explores influence and how businesses can excel by utilising this quality or skill. The writing process involved intensive research, including two lengthy interviews with influential Sydney-based figures, Brett Kelly of Kelly+Partners Chartered Accountants and Fred Schebesta of Finder.com and HiveEx.com.

It quickly became apparent that there were patterns in the advice given by each interviewee. So, here are those patterns – as 5 key steps to becoming more influential in business. May it whet your appetite for more wisdom and insight, to be found in the comprehensive Power of Influence guide.

Get your free copy now

1. Set the agenda

Before you attempt to influence others, an important step is to focus on yourself. Develop a clear understanding of what you wish to achieve – your objectives – why you want to achieve them and how. The next step is to see where other people fit into this, finding common objectives and then doing the necessary hard work to transform your vision into a reality.

In order to become influential externally, one must first turn inward – Brett Kelly shares, “To me, it comes from influencing yourself. To have done the work in order to understand what it is you’re trying to do, who you’re trying to do it for, how you’re going to do it and why that makes a positive difference to people.”

2. Keep your hands dirty

Respect is earned. And the same is true of influence. You’ll never be able to win people over to your point of view or objective if you don’t demonstate to them that you’re reliable and hard-working. Influence is all about leading by example. If your team doesn’t believe you’re working hard, then they’re not going to follow suit. Simple as that.

Fred Schebesta shares that his confidence as a leader comes from his willingness to put nose to grindstone: “I am confident. I did a lot of things, and I knew they were going to work because I calculated it. I’ve done the extra work and I’ve done the extra plan. I’m the one who’s there at night looking at the spreadsheet, making sure and speaking to the customer, checking it out and double checking.”

3. Ooze confidence

Confidence is something that Brett Kelly agrees is fundamental to being able to influence effectively. He believes, “The thing that you can do that can most help people is to inspire confidence in them, to give them certainty where often they don’t have it. Where they’re a little bit, “Oh, I’m not sure,” you need to be very certain.”

As is true in so many of life’s contexts – confidence is key to success. Being able to transpose that confidence onto your team, colleagues or partners is a powerful tool of influence.

4. Foster healthy relationships

Rather than referring to expanding one’s sphere of influence as “networking”, Kelly prefers to think about the process as “relationship building”. Meanwhile, Schebesta uses the term “social engineering”.

Being liked by people is an obvious way to get them onside. By keeping this consistent, taking a genuine interest in others and doing your best to help them, you’re likely to be treated in the same way. This is as important in business as it is socially, a simple concept that shouldn’t be underestimated.

5. Get your finances straight

Having a financially stable position in business, as an owner or an employee, is vital to maintaining influence. Being well-funded is the support that allows you to put in the hardwork. It removes pressure and can help you lead confidently, unencumbered by financial strain. Octet can help you decipher what the best options are for you, delivering finances to help you build and exercise your influence effectively.

In the words of Kelly: “Get your accounts, straight. Get the financing in place that will allow you to hit your growth objectives. And make sure you build a personal relationship with whoever’s providing your finance, whether that’s debt or equity, such that they understand your business, they trust you, and that they will continue to back and invest in you.”

Get your free copy of The Power of Influence to learn more about how you can become more influential and bring power to your business.

Unlock your secret weapon in retail

Posted on May 14, 2019May 22, 2024 by Duncan Khoury

It’s no secret that retail businesses are subject to one of the most fickle customer bases. Unstable sales conditions can put huge financial pressure on owners and the teams they employ. Having adequate cashflow allows businesses greater resilience in the face of challenges. In addition, the right finances and support can arm ambitious retailers with the means to capitalise and flourish.

Coasting the ebbs and flows

Octet’s recent discussion with Australian retail veterans and trailblazers, Wittner Shoes, helped shed light on the value that finance solutions can bring to businesses in their sector.

According to CEO Michael Wittner, “All businesses go through good times and bad. And over a hundred years, we’ve certainly had peak periods of growth and then periods of decline. So, by having a product like Octet, you can future-proof your business during those down times.”

A major hurdle in retail arises in managing cycles of inventory, occurring in the space between purchasing or producing a product and selling this stock on.

Whatever the size of the business, this process can be even more stressful in the unavoidable slow or irregular sales periods. To add one more layer of pressure, even if you see drops in sales, certain financial responsibilities never cease, such as meeting staff payments.

By contrast, in order to maximise on potential trade booms, businesses may need the capital to increase their inventory and sales capacity. Seasonal spikes in the calendar, like Christmas or Valentines, can be what keeps a retail business going. However, if you don’t have the cashflow to keep up with customers, then you’re liable to miss out on important growth opportunities.

This truth of the retail trade is a recurring factor of business for Michael Wittner, “Obviously in a fashion business like ours, we have massive peaks at the start of the season when we’re bringing in new ranges, so having a product like Octet can be terrific in terms of managing those peaks.”

It’s also worth considering factors that may affect business beyond consumer behaviour. For example, if you’re receiving goods from China, there are dates to watch in order to avoid a supply vs. demand obstacle. With the Lunar New Year falling in February, many businesses in China effectively shut up shop for several weeks. Australian businesses need to think ahead to stock-up in advance of this period, necessitating extra funding.

Room to grow

Whether you’re expanding into a franchise at home or taking your business global, getting a foothold in new territories requires capital. Having financial room to breathe during key growth phases relieves stress and allows management to think clearly, pace itself and make well-reasoned decisions. This is an powerful position to be in when your business is upping the ante – and the stakes.

Outside of finance, when entering new markets, Octet can help your business liaise with new suppliers and partners. With offices in Shanghai and Hong Kong, we have experts, fluent in a broad range of languages at your disposal. This support can bridge the language barrier and smooth the process of onboarding parties to new systems such as the Octet platform, which streamlines payments for both buyer and seller. This was a feature of particular appeal for Wittner in entering the new partnership:

“One of the things I was surprised about, was how easy it was to actually set up the Octet platform. Not only here in Australia, but surprisingly, in China, in our factories. The fact that Octet has offices in multiple countries was of enormous value. I’m excited about the opportunity for us to reach new markets and distribute and expose the Wittner product to new customers.”

Keeping options open

Octet can offer support to fit your needs and objectives, bringing flexible finance solutions to retail businesses of varying shapes, sizes and scales. For larger or more established operations with the option of receiving backing from banks (such as Wittner Australia), Octet facilities can be utilised to supplement, without interfering with terms from other financiers.

Beyond bank loans, Octet finance facilities can be combined with sources of funding as wide ranging as credit cards all through the convenience of the Octet platform. Your supplier will then receive one consolidated payment from Octet, streamlining the process.

According to Michael Wittner, their relationship with Octet has helped them improve their other business relationships. He shares, “Our suppliers have really taken to it. They love Octet because they get paid the day the shoes leave the factory, and we love it because it provides us with some extra cashflow.”

Finance facilities and seamless payments can furnish you with more cards to play when entering the negotiation room. When approaching suppliers in the interest of reaching a better deal, having access to ample funding can allow you to bargain for early-settlement discounts. This approach can in turn save your business significantly over the long-term, allowing you to economise through a win-win situation.

The needs of every retail business are different. With ongoing guidance from Octet’s expert team, you can be sure that you’re getting the most from your finances. Talk to Octet about our flexible options, to access funding that makes sense to your business, your market and your objectives for the future.

Why business finance is your key to finding leverage

Posted on November 15, 2018May 20, 2024 by Duncan Khoury

When it comes to business negotiations, perhaps the most important phase is the preparation. An integral part of the planning process is to consider not just what you want from the exchange, but what you can bring to the table. Getting a great deal is as much about what you can leverage and have to offer as it is about what you stand to gain.

More than an afterthought

All too often, business finance is something considered on the fly, a resource used to help with an immediate situation. However, thinking about your cash flow and ongoing funding support with eyes to the future can set your business up to maximise – and the context of deal-making exemplifies this perfectly. Octet’s finance solutions can help your business find leverage, flexibility and wriggle room in negotiations.

Many clients seek finance solutions in a bit of a fluster – energy that no doubt follows them in to the negotiation room, hampering the ability to make a good offer or carefully considered decisions. This fluster could become an achilles heel in the end, leading the other party to take advantage or be put off from doing business altogether. The deals struck should always be in your business’ best interest – ideally, for your prospective business partner, too – not because you’re backed into a corner or are so desperate for business that you’ll take any offer. Being in a financially sound position will empower you with a strong foundation and options.

Bargaining chips

A strong credit line can help you to find and accelerate opportunities throughout your business operations, including in negotiations. A tangible example of this is seen in trade or purchasing facilities. Simply having access to a revolving line of credit can be a great way to bring more options to your proposal.

To put this into context, imagine you’re negotiating with a supplier on the price of an order. The ability to bring the payment waiting time from the standard 30-60 days down to zero is a bonus the other party would be remiss to not utilise. You’re now in the position to open up the conversation to better terms or prices by negotiating an early settlement discount. Bargaining chips that are of high value to them, low cost to you are aces that it pays to have up your sleeve.

Go bigger

Another scenario could be the option of increasing the size of your purchase or frequency of your purchase based on the facility you have recourse to – thanks to the appropriate. This could be a simple yet effective way to sweeten the deal for the other side, leading to opportunities such as better rates through economies of scale.

Octet customers can also be put in a stronger position by using our platform. Through this digital wallet, you can make payments in foreign currencies, accessing sharp exchange rates. Offering to pay parties overseas in their preferred currency, removing the need for conversion on their part and giving you certainty of the absolute cost, can be a handy asset to be able to leverage.

Octet even has offices in China who can engage with local suppliers on your behalf. Domestic and overseas suppliers connected on the platform may also feel more assured to do bigger deals with Octet customers, simply due to a trusted and common link that connects the two parties.

Confidence on your side

Negotiating with confidence will impact how you behave and, ultimately, the outcome. Confidence can be gained through knowing that you have chips to bargain with and your finances are in order, clearing your mind from stress. This clarity will enable better, more measured decision making. Particularly when negotiating with stronger competitors or pitching for much larger clients, confidence in what you can offer and can actually deliver may mean the difference between winning or losing the deal.

With many factors at play, financial solutions that suit your business’ unique needs and aspirations can arm you with the means to negotiate better deals. Contact Octet to see what power you can leverage for your business.

Want to learn more about good negotiations? Download Powering Business Issue 1: The Power of Negotiation.

Are you prepared for negotiation success?

Posted on November 8, 2018May 20, 2024 by Duncan Khoury

Business negotiations are a challenging practice. And there’s a big difference between a skilled negotiator and an amateur. However, a lot can be said for having the right preparation behind you – being better prepared can give a novice the edge over even the most seasoned expert. The trouble is knowing what to prepare and how. That’s why we’ve put together this negotiation checklist, so you can go in confidently, with your ducks in a row.

1. Do your research

How you approach the negotiation is going to be heavily influenced by who the other party is. So, getting a clear picture of who’ll be on the opposite side of the exchange is a logical and advisable first step in your preparations. Learn about their company and, if you can, deals they’ve made in the past – the good and the bad – to get an idea of what a positive outcome might actually look like.

See who you’ll be personally dealing with. Decide on the best way to approach them and make sure that someone involved on the other side is a decision maker. You’re off to a bad start if the people you’re dealing with don’t have the authority to offer any kind of concessions or compromises.

2. Form the team

Now you know what the other side looks like, you should think about who’s going to be taking part on your side. Figure out who’s coming to the negotiation and what role they’ll play.

In an ideal situation, negotiations will be done as a team, ideally of three people, especially in a high-stakes scenario. This provides room for a lead negotiator (the most skilled and informed), a summariser (the scribe and timekeeper) and an observer (someone in a senior role). The three-pronged approach provides room for adequate support for the lead negotiator.

3. Make a game plan

Having a methodology or strategy for negotiation, both at an organisational level and on a personal level, will provide a good foundation to walk in with. That being said, you need flexibility in order to compromise and field curveballs should they come your way. So, whilst strategy is a great point of departure, it shouldn’t override setting tactics for what you want to get out of the exchange at hand.

Don’t make the classic mistake of walking in without a clear idea of what outcomes you actually want. Here lies a tendency seen in many preparatory contexts – the most important detail is overlooked. In figuring out how you’ll approach the exchange, ask yourself: what do you aim to get out of the negotiation? And of these things, what are your priorities? This will help you figure out what’s essential versus what’s desirable.

4. Find your leverage

Whilst you consider what would be the best deal for you, put yourself in the shoes of the other party. Think about how you can sweeten the deal for them, the things that may be of high-value to them yet come at a low cost for you – your bargaining chips.

Look at what you can add to your offer – and how that would then affect your asking price. Decide how much you’re willing to compromise before it’s time to take a break and re-assess. Flexibility is important, but this is also a crucial thing to have in your back pocket: the willingness to walk away.

Octet’s finance solutions can help businesses gain leverage in the exchange and add power to your arsenal. With the right tools you could:

Offer a shorter waiting time for payment.
Increase the order size in exchange for a discount.
Open up a conversation about future business.

These examples will give you buying power that may come in handy at the negotiation table.

5. Choose your setting

Consider the setting for your engagement. Meeting face to face is always the best way to do negotiations. Decide whether you’re meeting at your office, theirs or on neutral ground.

Food is also an important factor to take into account. It might sound trivial, but having something to eat in the negotiation room is actually proven to produce better, more profitable outcomes. Sitting down to lunch and sharing a meal is what people do when they’re relaxed and on friendly terms. So, it follows that doing the same within the context of business makes both parties more likely to be open and cooperative – the recipe for fruitful negotiations.

From finance to food, there are a few tangible resources you can call on to put your best foot forward. In addition, simply plotting a course and doing relevant research is going to go a long way when it comes to business negotiations. So, if you take the time to prepare well, then you’re off to a good start before the process itself has even begun.

Read more in Powering Business Issue 1: The Power of Negotiation.

Bring more power to your business – with Octet’s new guide

Posted on October 25, 2018May 20, 2024 by Duncan Khoury

To help businesses go further in their trade, Octet has created the Powering Business series. These quarterly guides take a deep dive into key topics as we meet experts in relevant fields to get their insights and advice for aspiring businesses.

Welcome to the power of negotiation

Issue 1 of the series focuses on the power of negotiation, and how it can be used most effectively.

Get your copy

We negotiate every day, often without even realising. Social creatures, the need for us to reach agreements with one another is something unavoidable. Yet negotiation is as diverse in context and method as the contents of a toolbox.

Despite what many believe, when it comes to business, negotiation isn’t just about haggling a better deal. In fact, in the majority of business settings, approaching a deal-making scenario by attempting to haggle could actually be detrimental to the outcome.

Meet a master

Octet spoke with expert, Simon Kelland, to help make sense of business negotiation, demonstrate how to sharpen this skill and how this tool can empower businesses.

As a leader and managing partner at Scotwork, a premier independent negotiating consultancy, Kelland has put many years of dedicated study and finesse into the practice. The firm has coached over 200,000 senior managers, in 24 languages and 40 countries worldwide. Having led hundreds of successful, high-stakes negotiations, Kelland brings skill and experience to Scotwork Sydney in order to help clients learn to better navigate the complexity, pressure and delicacy of deal-making.

It’s a journey

We look at the process from start to finish and beyond, offering play-by-play guidance for negotiators. Findings are paired with examples of case studies to demonstrate how the ideas can play out in the real world.

We began by exploring negotiation styles, how they’re useful and when they should be adopted. Whilst you may imagine style as something fixed and consistent, in fact they differ not just from person to person, but negotiation to negotiation, and may even change several times within any given exchange.

Next we turn our focus to the preparation phase, looking at what research should be done, how roles should be designated, where meetings should be scheduled and even whether or not food is a good idea. We discuss how to plan in terms of finding leverage, illustrating how Octet can assist businesses by giving them greater financial flexibility that allows them to acheive better terms. With debtor finance and trade finance options that suit your needs, you can gain an edge in business negotiations.

Part 3 moves into how to navigate the negotiation process itself. We take a look at why confidence is your secret weapon, what to keep in mind when communicating between cultures and how to build the all-important trust that will ensure smooth and successful outcomes.

Lastly, we examine the final phases – closing the deal – as well as what takes place afterwards and what the future holds for business negotiations.

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Stay tuned for the next edition of Powering Business.

Is accounts receivables factoring right for your business’ lifecycle?

Posted on December 26, 2017May 20, 2024 by Duncan Khoury

While many of us are familiar with concepts like lifecycle investing when it comes to our personal lives – we often invest in less risky assets as we head closer to retirement – often business owners fail to apply lifecycle thinking to their business.

The downside to this is that business strategy is often not updated as a business grows, causing owners and executives to miss opportunities for cost reduction or better organisational management. And while it is widely understood that a strategy put in place when a business launches will not be as effective once the same business is more mature, many business owners caught up in the day-to-day mechanics of running a company, fail to address this.

Business lifecycle stages

There are 5 typical stages to every business;

Seed
Startup
Growth
Mature
Decline

Depending on a number of factors, ranging from your competitive position in the market, your growth ambitions or the saturation of your services in a particular segment, your business may lean towards either the growth or mature stage of the lifecycle more heavily.

However, if your business operates multiple product lines, or regularly launches new services, you may fluctuate between the two. Ultimately, if your business is positioning to be acquired, or you seek to return profits to private or public shareholders, you will most likely be continuously seeking growth opportunities wherever possible, to maximise future returns and hedge against new competition.

Why lifecycle thinking matters when funding your business for growth

Good lifecycle strategy can be applied to a myriad of areas in a business, including financing. In fact, a funding strategy is most important in the early days of your business, when access to cash is paramount. This is because initial revenues are unlikely to support all your outgoings and set-up costs, as they would in the mature phase of the business lifecycle.

When thinking about a funding strategy for the early stages, the track record of your business is a key factor. Like it or not, this plays a large role in your ability to access finance.

It is not uncommon for traditional lenders to refuse to extend credit to businesses who have not passed the 1-year milestone of ‘being in business’. This is because the failure rate of startup businesses during this period is so high. Traditional lenders have no shortage of businesses applying for finance who have already passed this bar. Based on this, then viewed through a bank’s commercial and risk lens, mature businesses are a far more attractive proposition than the seed and startup end of the market. So credit flows to mature businesses far more frequently.

If your business strategy can only get off the ground through external funding, and you have no access to personal funding, be that debt or savings, then this will be problematic. Ideally, you should be able to support and finance the operations of your business for at least 6 to 12 months. These fundamental considerations for your funding strategy have a direct impact on your business strategy, and the way these two areas interlink will continue to be central to your business going forward.

However, once you move into early-stage revenues and have a number of clients on board, then using your personal balance sheet and credit should be a last resort. Instead, now your funding strategy should consider other funding options, like accounts receivable factoring, a form of debtor finance.

What is accounts receivable factoring and why should I consider it over traditional finance?

Accounts receivable factoring allows you to leverage your invoices to access capital. Once an invoice is received, a factoring company will extend your business a fixed percentage of the total amount, in advance of the client’s payment.

During the early growth phase, maintaining consistent cash flow is paramount. Any funding strategy you have now should provide you with the flexibility to dip in and out of credit when you need it. Unlocking capital from invoices with long payment terms, that could throttle or strangle your business allows you to smooth cash flow, and make it through to the late growth or mature lifecycle stage.

If you’ve only been operating for a short period of time, your business may still have a thin credit file. This can limit your chances of accessing bank loans. Factoring businesses are more inclined to look at the credit strength of your clients when making a decision as to whether to extend you debtor finance. In this sense, in the early days, debtor finance can trump slightly more affordable but significantly harder to access bank finance.

Read more here on how debtor finance and supply chain finance differ to traditional business finance.

Smart funding strategies should have an eye to the future

Tapping into debtor finance early on means you can establish a track record of making timely payments early on in your businesses lifecycle. This is important in ensuring your business’s track record of payments is watertight – future credit decisions for other types of funding will depend on this heavily. And remember – the relationships you have with your suppliers and your early stage employees will also rely heavily on the reliability of your payments.

Funding strategies can’t be set and forget. Just like your business, you need to work on them every 6 to 12 months. If you’d like to discuss what funding strategies are right for your business, book in a call with our team of business lending experts today.

How is supply chain financing different from other types of business finance?

Posted on December 5, 2017May 20, 2024 by Duncan Khoury

Trade relationships can be problematic for one main reason – both suppliers and buyers are motivated by two opposing forces when it comes to cash flow management. Suppliers seek to be paid as soon as goods and services are delivered, while buyers seek to delay payment.

As a result of their increased purchasing power, many larger buyers are able to delay payment by dictating payment terms beyond a supplier’s working capital comfort zone. Small buyers, on the other hand, can be just as problematic and are renowned for letting unpaid invoices fall overdue.

When suppliers themselves are buyers, which is often the case in a multitude of industries, one large contract with a large corporate buyer on 60-day terms can severely impact their ability to pay their own suppliers on 15 or 30-day terms. Once overdue payments are factored in, then it should come as no surprise that a lack of cash flow is the leading cause of small business insolvency.

And as global supply chains become more and more prevalent, factoring in time delays associated with slower cross-border transactions is also something suppliers must contend with.

What are businesses doing about it today?

When revenues aren’t consistent enough to support long periods without payment, then faced with the predicament of needing to keep the lights on and make payroll, suppliers will often look to source capital from elsewhere as an interim business prop.

Traditional products from banks and non-bank lenders, like business overdrafts, short-term unsecured business loans or even a line of credit tend to be the traditional default for many.

Yet like most defaults, they can also be the most expensive and the least flexible option. A line of credit is a typical example. Many businesses are forced into paying an annual or monthly fee for access to temporary debt they may only need to tap into 2 or 3 times per year.

Introducing supply chain finance

The key to resolving the bottleneck in liquidity is to rethink the financial relationship between suppliers and buyers. This means acknowledging both of their opposing desires; suppliers who seek ‘as soon as possible’ payment, and buyers who want ‘as late as possible’ payment.

With the help of a financial intermediary, it is possible to design a system that satisfies both needs, yet still keeps the relationship between supplier and buyer intact.

This system is called supply chain finance, and thanks to technology, is now one of the fastest growing types of finance in the world. While related to in part to invoice discounting and factoring, supply chain finance does not involve the sale of an invoice to a third party.

In essence, it is the extension of a buyer’s accounts payable function and the introduction of a funding partner into the buyer-supplier relationship.

In a nutshell, here is how it works:

1. A supplier issues an invoice to a buyer, as per normal.

2. The buyer approves the invoice.

3. On approval, a funding arm linked to the buyer is notified the invoice has been approved. This may be through a direct integration into the buyers accounts management system, or an upload into the funder’s online platform. To get a sense for how this works with a real world example, see how the Octet platform works.

4. The supplier, who also has access to the platform is able to track all approved invoices. They can then request early payment on any invoice.

5. If early payment is requested, the funder automatically issues payment to the supplier, minus a small fee. Settlement is often as early as the next business day.

On the original invoice due date, the buyer issues payment to the funder, completing the loop.

What are the benefits for suppliers and buyers?

When suppliers are forced to plug working capital gaps with loans, they must rely on their own credit rating and liquid assets to secure the facility. For small businesses, this can be difficult, often forcing them into non-commercial terms with lenders.

With supply chain finance, because the buyer is responsible for establishing the facility, the supplier can in effect piggyback on their credit rating, and avoid establishing their own facility altogether.

If the buyer is significantly larger and more powerful from a negotiation standpoint than the supplier, then they will be able to negotiate access to debt on far more favourable terms.

This is a great win-win.

You might be wondering why a buyer would consider wearing the cost of supply chain finance, rather than simply letting small suppliers battle with the downstream effects of their delayed payments.

There are a number of reasons why, and not just the damage to the relationship that is caused when a buyer puts a supplier under cash flow pressure.

The reality is, when a supplier is forced into a situation where overheads are increasing due to expensive working capital facilities, this will feed through into their pricing, hurting buyers in the long term.

In addition, being able to delay payment by leveraging the funder at the heart of the system also improves working capital management and allocation for the buyer, helping them get a return on their investment in the facility in other less direct ways.

If you would like to learn more about how Octet is helping a global community of buyers and suppliers tap into the benefits of supply chain finance, contact our team of professionals today.

How Can Invoice Financing Help Your Business Grow?

Posted on November 28, 2017May 20, 2024 by Duncan Khoury

Kate Carnell, Australia’s Small Business and Family Enterprise Ombudsman has been quoted as saying sluggish payment times for small business suppliers are “the biggest source of anxiety” for the sector.

And while the Greens plan to introduce legislation later this year to enforce penalties for corporations who make late payments to small businesses, this is only one of the stresses small business owners have to face when it comes to managing their monthly budgets.

The good news is there are solutions to stagnating cash flow that exist already, and which you should be tapping into, to help ease any short term liquidity blockages that stem from business variables outside your direct control.

And thanks to innovation in the financial lending sector, these solutions are increasingly affordable and easy to access. Invoice financing is one of these financing options and is a lending model that is rapidly growing in popularity locally.

While an estimated 1 in 5 UK businesses doesn’t know about invoice finance, in Australia the sector is undergoing rapid growth thanks to a boom in technology-driven offerings across the banking and non-bank lending sector.

In fact, a recent KPMG report on alternative financing in the Asia Pacific region found invoice finance is now the third largest lending type in the alternative market, with growth of 24 percent in 2016 to US$129.91 million.

How does invoice finance work?

Invoice finance is designed to help you make your unpaid invoices liquid sooner, so you can put that cash towards growing your business. Unlike a standard loan, you are not taking on debt, simply freeing up capital already owed to your business. For this reason, it can be an attractive and manageable funding mechanism.

There are two distinct flavours of invoice finance – factoring and invoice discounting. One of the primary differences between the two is whether the collection of invoice payment remains handled by you or by your finance provider.

How does invoice factoring work?

In simple terms, factoring involves your business selling invoices direct to a financing company for slightly less than the total amount owed. The factoring business then contacts your client directly to collect the final payment, passing what remains through to you, while retaining a small amount as their fee. Factoring essentially takes the entire collections process off your hands, and your client is fully aware of their involvement in the managing and handling of your sales ledger.

While some businesses are happy to outsource this administrative overhead, others prefer to remain as the single touch point for a client across all aspects of the relationship and keep any financing arrangement they have in place with a third party confidential. This means invoice discounting can be a more attractive, alternative option.

How does Invoice discounting work?

Invoice discounting is a confidential service that allows your business to receive a cash advance against your outstanding invoices. Unlike factoring, with an invoice discounting arrangement you are still responsible for collecting payment direct from your customers.

As a general rule, most invoice financing companies will advance anywhere up to 85 – 90 percent of the invoice, however depending on your credit history or the size of the invoice, this may differ.

Rather than outdated paper-based models, tech-enabled invoice financing companies now allow business owners to upload their invoices onto a online platform, with up to 85 percent of approved invoices able to be financed within 24 hours.

You can learn more about the benefits of invoice financing here.

While both invoicing discounting services and factoring businesses do charge a fee, the free flow of capital back into your venture allows you to jump on growth opportunities as they arise. You need to do your numbers to understand if this sort of cost is worth incurring based on the potential profit that can be generated from opening growth channels sooner.

How do I know if invoice financing is right for my business?

Before you start researching the market for invoice financing providers, it’s important to identify if this type of financing arrangement will suit your business and growth objectives. Luckily the checklist is small. Typically speaking, if your company offers payment terms to buyers, is seasonal in nature or perhaps contracts to corporates who can dictate longer than average terms, then invoice finance can be the cash flow smoothing hero you’ve been looking for.

Wondering if your peers are active consumers of this type of finance? Well, according to Real Business Rescue, the most common industries using invoice financing include professional services, construction companies, logistics providers, manufacturers, print and publishers, recruitment businesses, companies in the transport industry, wholesalers and security companies.

Ready to take the next step?

If this article has resonated with you, and you’re ready to tap into your own capital sooner to grow your business, it may be time for you to start evaluating potential invoice finance providers. As a starting point, Octet offers a range of debtor finance options, including invoice discounting and factoring, and all available online. To learn more get in touch with our team today, who can also help you compare to other finance options on the market.

Secured vs Unsecured Loans – Choosing the Right Business Finance

Posted on November 14, 2017May 20, 2024 by Duncan Khoury

Getting your head around financial jargon is just one of the many challenges you will face as a business owner.

And if you’re on the hunt for credit, then secured vs unsecured loans is probably one of the many phrases you’ll find yourself typing into Google late at night, as you try to work out what is the best option to finance your growth.

But to save you some time navigating banker jargon, we’ve explained the key differences between these two types of credit below, plus we take you through some key considerations when weighing up the two options.

What’s an unsecured loan?

An unsecured loan is credit extended to you by a lender over which no security is taken. That means if your business fails to pay back the loan, the lender has no ability to force you to sell assets the business or you may personally own, in order to recover any money owing to them.

You’re probably thinking, that’s pretty risky, why would a lender offer this sort of unsecured finance? Well, every lender has a different credit policy, which is a set of rules they use to determine if your business fits the profile of companies they would be happy to lend to.

Many niche lenders that operate in certain verticals understand certain business models better than generalist lenders (like banks) and build specialist lending businesses off the back of this.

This means they can feel more comfortable taking on the higher risk associated with unsecured lending and offer a market competitive price.

Having said that, it’s highly likely you will still be assessed at a personal level, and some lenders will take your personal creditworthiness into consideration before lending you any money for business purposes.

In some cases, they may also ask for a personal guarantee from a director. Remember, if this is you, then it does mean you are personally liable if the business fails to meet their repayments. Always read the fine print!

What is a secured loan?

A bank or non-bank lender will offer you cheaper business credit if you have an asset you are willing to back your loan agreement with. In the industry, this asset is often termed as ‘collateral’ and forms the foundation of a secured loan.

In this scenario, you are entering into a contract that gives the lender the power to take and sell the asset you put up as collateral should you not be able to make your loan repayments.

Because this ensures the lender has a much better chance of recovering money owed to them, they are comfortable to lend to you at a lower rate than in an unsecured scenario.

Depending on the credit policy of the lender, collateral that might be considered could be an owned commercial premise, machinery and equipment, investments or future payments from customers receivables.

However for many small business owners, the collateral most often in demand is the family home.

When this is the case, if multiple directors are involved in a business it can be difficult to agree upon who should take on that risk, and how they should be compensated for doing it.

In some instances risk can be spread, however it’s important to remember that if things do go belly up, the director with the deepest pockets could be the last person left standing to shoulder the burden of the debt.

So when taking on a secured loan in a multiple director situation, legal advice is a worthwhile upfront investment.

How to choose between the two?

If you’re in a position where you have assets and you can choose, consider yourself fortunate! Many young business owners just starting out often don’t have assets they are able to use to access secured finance, and are forced to take up unsecured loans or use personal loans and credit cards.

Choosing based on price is where most people begin. Lenders invariably charge more for unsecured loans, to compensate for the higher risk they take on. The best analogy from personal lending is a credit card versus a home loan. A credit card is unsecured personal lending and can cost you upwards of 20 percent per annum, while a mortgage, which is secured against your home, can have rates as low as 3 or 4 percent.

But while the price is an important factor, the risk you and your business assume as part of a secured lending contract should also be taken into consideration. Sometimes access to unsecured finance, while slightly more expensive, is a better option than using collateral to get a slightly better price.

These sorts of decisions reflect your own attitudes towards risk and often the relationship you may have with other business partners. And with more and more niche lenders coming on the market, unsecured finance is starting to become a more financially feasible option as well.

If you’re ready for a more in-depth discussion on which type of loan is right for your business then contact the team at Octet today.

Is your business ready for a business finance loan?

Posted on November 7, 2017May 20, 2024 by Duncan Khoury

Bootstrapping your business by funding growth from personal finances and early stage revenue is often seen as the ‘right’ way to grow your company.

And while there can be a real sense of achievement from knowing you built an empire off the smell of an oily rag, it often limits your ability to supercharge your growth, preventing you from taking advantage of business opportunities before your competitors do.

That’s why many savvy, small business entrepreneurs now understand that with a little modelling and careful budgeting, it is possible to combine a bootstrap mentality with a sensible amount of strategic financing. In fact, the right business loan at the right time, structured in the correct way, could allow you to get the best of both worlds, helping your business get where it needs to be faster.

So if you’ve been bootstrapping for some time, how do you know whether you’re ready to take on your first business finance loan?

Be honest about where your business is at

The first step is to evaluate where your business is at. Taking on debt to recover from business losses is not an ideal position to start from. Instead, your business should be generating solid revenue month on month, and operational and customer acquisition costs should be fully understood and under control. If you’re not there yet, this is the first sign you probably need to bootstrap for a little bit longer, to get into a position where the growth engine is humming nicely.

1. Build a plan

A business without a plan is a business without direction. So before you contemplate approaching potential lenders, you need to have a firm idea of exactly what you need a business loan for, and how this debt investment will translate into revenue and profit.

A great example of where businesses look to invest is in growing their top line revenues by bolstering sales efforts. If you have a solid handle on your acquisition costs from your bootstrapping days, then it is safe to assume this spend is under control. Putting a business loan towards acquiring new customers should, therefore, generate a predictable outcome with respect to additional revenue and profits, with minimal variability and risk.

While you’ll pay a slight premium to acquire future customers due to the interest that builds upon the money borrowed, chances are additional scale in your business through new customers could reduce operational costs elsewhere, netting off the costs of borrowing.

Having this plan will not only give you more confidence in your ability to manage a business loan but will also ensure you are on the front foot when getting quotes from potential lenders. And it’s worthwhile remembering a solid business case will ensure anyone financing your business can quickly evaluate the risk and payback period, both important factors when it comes to you negotiating a great rate.

2. Work out which business loan is right for you

If you’re a first-time business borrower don’t be embarrassed if you’re confused about what a business loan is, or how it’s preferable to financing your business through credit cards, a personal loan or an existing mortgage.

Typically speaking, a great small business loan works with your cash flow, not against, understanding the ebbs and flows of your business. And unlike drawing down on an existing mortgage, some business loans will not require you to secure the funds against a personal asset, which can relieve stress on a variety of fronts.

How do business lenders do this? Well, while there are many types of basic, unsecured business loans on the market, it’s also possible you have assets in your business that you never even realized could be used to help you secure a business loan. One example is invoice finance which uses your unpaid invoices as an asset to help you secure finance.

3. Choose your lender wisely

New technology players in the fintech space are also transforming the specialized online business lending marketplace.

Compared to a ‘one size fits all’ personal credit card or loan, these data-driven finance solutions can be a game changer for your business, speeding up the application process and generating tailored rates. Octet is one such lender pioneering this sort of approach. Octet offers innovative financing solutions that simplify business finance and allow you to pool your trade and invoice finance with your existing credit card limits for supplier payments.

In Conclusion

If you follow these four steps when considering if your business is ready for a business finance loan, then you’ll be well positioned to graduate from a bootstrapped business to a high growth venture. And given there’s no time like the present, why not get started today?

Interested in learning more about the various types of finance Octet provides? Get in touch with our team today.

Six tips startups should consider before working with suppliers in Asia

Posted on January 14, 2017May 20, 2024 by Duncan Khoury

It’s not always smooth sailing for startups planning to work with a new market. When it comes to markets like China and other Asian countries, there can be significant challenges for any startup not versed in the business culture or intricacies of that market, such as the negotiation of payment terms, quality of stock and fraud prevention.

For those looking to work with suppliers in these markets, we’ve put together some advice that you may want to consider.

Don’t rush, scale slowly

Without a proven track record, startups often have to negotiate with sceptical suppliers. In most cases, suppliers will require a percentage of the purchase order up-front, with final payment due when goods are ready for delivery. Do not be embarrassed to ask for a cash settlement discount in these cases and ensure you’re getting the best possible outcome.

Once the first transaction has taken place and supply chain finance has been replenished, startups can continue to build the quantities of orders with the supplier, eventually leading to more flexible payment terms.

Don’t let quality slip

It’s important to ensure the product you’re looking to purchase is of sound quality before entering into a contractual relationship with a new supplier.

The best way to do your due diligence when dealing with a new supplier is to get references from existing buyers, and request a sample of each product you plan to order before you enter into a purchase contract and make the initial deposit payment. Although the sample should dictate the standard of each unit ordered, it’s a good idea to start with orders of smaller quantities, allowing you to review the quality of each order or product.

It is also extremely important to ensure the supplier is capable of delivering the supplies you’ll need as your business grows.

Keep your options open

Don’t just rely on one supplier even in your growth stage — any disruption they experience will then be passed on to your business.

To minimise the risk, explore a selection of suppliers, even if you only select one supplier to engage with in the end. This way you have an idea of what other suppliers you could work with in the market, without making sacrifices on quality, should any unforeseen circumstance occur with your current supplier.

Familiarise yourself with your supplier

When you think about the ideal customer or partner for your own business, it’s usually people who are friendly, transparent, reliable and pay within set terms.

Your suppliers are no different. Whether you’re engaging with a new supplier, or there is a long standing procurement relationship with the supplier, ensure you keep in regular contact and make the effort to visit them at least once a year.

Be aware of cultural values and attitudes

Do some research on cultural traditions, such as etiquette, language, and customs practiced by the supplier in the country you’re dealing with. Demonstrating an understanding of these go a long way to make your supplier feel at ease and respected, and also ensure business runs smoothly. For example, a religious or national holiday may impact supplier output.

In addition, it’s important to take into account the nature of the country you’re working with: is it an established market? Is it a specialist market? The answers to these questions will help distinguish whether you’re in the right place.

Don’t be afraid to seek help

Engaging with suppliers in a new market can be risky, so it’s understandable that some small businesses opt for a sourcing company to help show them the ropes.

For a fee, sourcing companies will work with you to identify the right market for the supply you seek. They also help negotiate pricing, order samples and on some occasions also take you out to meet the supplier in person.

Stepping out and engaging with a new market such as Asia takes courage, but for many businesses it’s a risk worth taking.

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