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What is debtor finance? A comprehensive guide

Posted on April 8, 2024November 20, 2024 by Duncan Khoury

Whether it’s to improve cash flow, manage a sluggish sales period or realise growth potential, businesses will often need to seek external forms of funding. There are many finance options available, and it can be difficult, as a business owner, to know which way to go.

Debtor finance (also known as invoice finance) is often an attractive option for high-growth businesses. This form of funding enables a business to access funds tied up in its outstanding B2B invoices. And it’s a solution that is growing in popularity, with reports indicating more and more businesses are seeking this form of finance.

Start researching debtor finance and you’ll come across a range of terms, definitions and products, including invoice funding, invoice factoring, invoice discounting, and confidential and disclosed products. So, what is debtor finance, how does it work and how can it benefit your business? In this article, we explore these forms of financing, some of the products available and how they help businesses in a range of industries.

How debtor finance works

As any business owner knows, maintaining cash flow is the most powerful tool for starting, managing and growing your business. Strong, steady cash flow puts you in a better position to:

cultivate good relationships with your suppliers, as you’ll always have the funds to pay them on time
quickly take advantage of opportunities to invest in new products or services and stay ahead of competitors
weather financial storms when business is quiet, or you encounter supply chain issues.

But if your customers are slow to pay, that cash flow can get blocked. That’s where debtor finance products can help, by giving you access to funds tied up in your business’s outstanding invoices.

Sam Ralton, Octet’s Director of Working Capital Solutions, explains. “There are a number of terms used to describe these products. Invoice finance, receivables finance, debtor finance — they all cover essentially the same broad offering, which considers the receivables ledger or the invoices that are outstanding in a business and provide funding against those.”

Invoice factoring and invoice discounting are two ways to finance outstanding receivables to keep money flowing. Let’s explore these options.

What is invoice factoring?

With a debtor finance facility known as invoice factoring, you effectively sell your accounts receivable to a financier. In exchange, they give you an agreed percentage (often up to 85%) of the value of the invoices upfront — quickly and easily.

From there, the financier becomes responsible for collecting and processing payments from your clients. Once they’ve collected payment, they pass the rest of the money onto you, minus a small fee. Here are a few things to keep in mind.

Because you pass the responsibility of collecting payment to the financier, invoice factoring can potentially save you bookkeeping fees and staff time. The trade-off is that you forfeit some control over your day-to-day operations.
Invoice factoring companies generally help with sales ledger management by allocating payments, and sending statements and reminder letters. The associated fees are therefore higher than for some other debtor finance services because the financier does more work.
Your customers will know you’re using a financing facility because they need to deal with your financier.

What is invoice discounting?

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

With invoice discounting, you manage your sales ledger, which means you keep control of a significant aspect of your business.
Rather than operating on an invoice-by-invoice basis, invoice discounting is usually based upon your ledger balance as a whole. This lets you smooth out any cash flow fluctuations you may have over the period.
Invoice discounting also lets you keep your funding confidential from your clients. They won’t know that you’re using a financier.

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

The evolution of factoring and discounting

Sam says the term factoring is used less frequently these days. “In the early days, invoice factoring was fairly intrusive. Businesses found they had to hand in every invoice, and the financier would chase up the debts.”

Today, reputable finance providers like Octet offer more tailored debtor finance solutions and collaborative partnerships. “We have supply chain finance managers that are constantly in discussions with clients, looking for any cash flow issues or opportunities that may arise and assisting with these.”

“We have also seen the emergence of hybrid type disclosed invoice facilities that enable the business and financier to work in partnership. These allow the business to retain their receivables collections, with the financier simply sending monthly statements in support. It’s a lighter version of disclosed invoice finance and reflective of the progression of the product over the years.”

What’s the difference between confidential and disclosed debtor financing?

A confidential debtor facility is where your customers don’t know a third-party financier is involved. You’re under no obligation to tell your debtors (in other words, your customers) that you’re using debtor finance, and the financier does not contact them on your behalf.

It generally attracts lower fees as the financier can’t put their own debtor management strategies in place, and your clients don’t know they’re involved.

With disclosed invoice discounting, all parties know and agree to the financing facility. Your invoices will need to include communication regarding the third-party financier, who has the right to contact your customers to chase payments.

There are generally higher fees involved as this allows you to hand off debtor collection procedures to the financier and provides full visibility for all parties involved.

How does confidential invoice discounting work?

Once your facility has been approved and set up, you’ll need to communicate a change in bank details to your debtors. The new account is held in trust by the financier.

You then upload invoices into the financier’s system at the same time you send them to your customers. The financier then transfers up to 85% of the invoice value directly to your bank account, often less than 24 hours later. Then, once your customers pay the invoice into the trust bank account, the financier transfers the balance to you, minus their agreed fees.

This process means you can keep your existing accounts payable procedures in place. Chasing up late payers remains your responsibility, but that also means you maintain control of that vital relationship.

How does disclosed invoice discounting work?

Once you’ve been approved for a disclosed facility, the financier will get in touch with each of your customers as you upload their invoices into the system. Your customers will need to pay the invoices into a bank account held in trust by the financier, as they would with a confidential facility. However, they will know that it isn’t your business’ bank account.

Just as with confidential invoice discounting, you’ll receive up to 85% of the invoice value within as little as 24 hours of uploading the invoice into the system. Then the financier will liaise with your customers to collect payment. Once the customers have paid, the balance of the invoice value will be transferred to your bank account, minus fees.

Which is best: confidential or disclosed?

The best choice for your business generally depends on two factors:

Your business’ current credit rating. If your business has a strong credit rating, you may be eligible for confidential invoice discounting.
How much control you want to have. Some businesses prefer to keep debtor management as part of their client relationships, while others are happy to hand it off to a third party.

Businesses are becoming more comfortable handing over control of their debtor management and customers are becoming increasingly used to a third party being involved. Engaging a financier to access your receivables means you’re being smart about your cash flow. Accessing one of your biggest business assets enables you to grow faster, which is better for you, your suppliers and your debtors.

The advantages of debtor finance

Why would a business choose debtor finance over traditional forms of finance, such as a bank loan? Sam explains.

“Banks focus on ‘bricks and mortar’ assets and are very keen on taking property security and effectively offering a mortgage when it comes to business lending,” he says, adding that this is one of the major disadvantages of traditional bank finance. “That’s because not all businesses have sufficient property assets to use as collateral, nor do they generally want to use their director’s personal assets as security.

“Debtor finance is effectively funding against the biggest asset in most businesses — the receivables ledger, which is cash owed to a business by its debtors or customers. That ledger typically sits there as an asset, not doing anything until paid pursuant to agreed payment terms. Because a debtor finance facility actually uses that asset as security for funding, it removes the need for directors or owners having to put up property or other security.”

Sam says banks can also be slow-moving, taking more than six months to approve applications for finance applications. In the meantime, businesses can miss out on opportunities or fall deeper into cash flow woes. Debtor finance applications, on the other hand, can be approved within a matter of weeks.

Is debtor finance right for you?

When considering a debtor financing product or facility for your business, there are a few things to keep in mind. Like any form of finance, there are costs involved. These will vary depending on the provider, the type of product, the financier’s workload and whether it’s a confidential or disclosed facility.

“Generally, there’s an interest component on the borrowed amounts and a service fee,” says Sam. “There’s a bit more work involved in disclosed debtor finance because the financier is constantly reviewing the ledgers.

“But businesses using a debtor finance facility are probably only paying slightly more than they would for a standard mortgage or an overdraft facility.”

The suitability of this type of facility depends on your business and its needs. Sam understands some businesses have had negative experiences with debtor finance, but that’s often the result of choosing the wrong financier or using a product not suited to the business.

Business owners might also be concerned about handing over control of their accounts receivable or ledger management to a third-party financier. This is why choosing the right finance partner is vital.

Look for an invoice financier with a solid reputation, says Sam. “You need to have comfort in the security of the business that’s providing funding and partner with someone that’s going to last.”

Some finance companies offer quick fixes, which Sam advises businesses to avoid.

“There are a lot of companies that do short-term loans at higher interest rates, fairly quickly, but it’s not going to help a business become sustainable in the long term. We’ve seen business owners take up short-term loans and then realise how expensive they are. My advice is to look for a financier that is going to be a long-term partner and understands the overall business strategy and success measures.”

Is your business ready for a debtor finance solution?

There are several reasons why you might be considering debtor finance for your business. Due to your payment terms, you might be experiencing cash flow issues, find that you can’t restock until invoices are paid, or simply want faster-moving cash flow to open up growth opportunities.

“Most businesses that speak to Octet about debtor finance have high supply costs,” says Sam. “Let’s take the example of a labour-hire company, which will raise an invoice after the work has occurred. But they must pay staff before their invoices are paid.”

Debtor finance allows these businesses to fund their workforces without having to wait for debtors to pay. This is particularly helpful in the growth stage of a business.

“These facilities grow with the business because as you raise more invoices, you can generally access more funding,” Sam says. “And as a business winds down, the facility pays itself out so the directors aren’t left with a large hole that takes away their property.”

A fast-growing business was exactly the opportunity facing a NSW-based labour-hire company that recently sought Octet’s help. The business grew from a humble startup to turning over $30 million in just seven years, and it had outgrown its bank, which just couldn’t keep up with its need for flexible and fast funding. The business didn’t want to turn away new customers but it just didn’t have the cash flow to take on new business and pay its debtors on time. Octet’s debtor finance solution filled that gap.

A Western Australian-based network and telecommunications parts wholesaler was also outgrowing its existing funding arrangement when it turned to Octet. The business was growing fast, but its available capital couldn’t support that growth. Octet provided a notified (disclosed) invoice discounting line with a $600,000 funding limit. This gave the business a line of credit where it could access up to 85% of the value of its invoices as cash within 24 hours of customer sales.

Octet, the experts in debtor finance

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 business:

offers longer payment terms to customers
is seasonal
contracts to large corporations that 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 outstanding 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.

Octet’s Debtor Finance is available to businesses ranging from newer companies to well-established ones. Ideally, we would like to see an annual turnover of at least $1 million, an outstanding invoice value of $100K+, with some demonstrated business trading history (but don’t hesitate to contact us anyway if you’re fast-growing and turning over $500,000 or more, as we may be able to help).

Discover more about debtor finance

Considering a debtor finance solution for your business? You’ll want to team up with a financier you can trust. The right solution for you will depend on factors like how big your business is, your assets and the funding amount you need to inject.

Octet has been providing working capital solutions, including debtor finance, since 2008. Talk to us today to discover how we can power your business growth.

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.

Healthy balance sheets and why they matter

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

A healthy balance sheet is the sign of a strong business. It paints a story of where it’s been, where it is today, and how it’s prepared for the future. A healthy balance sheet is a critical financial report when it comes to securing business financing, as it highlights the strength of your business and its ability to weather any economic storms. In the aftermath of global disruptions and the uncertainty of a constantly evolving economic landscape, it’s never been more important.

Why is a healthy balance sheet important?

A healthy balance sheet is about much more than a statement of your assets and liabilities: it’s a marker of strength and efficiency.

It highlights a business that has the optimal mix of assets, liabilities and equity, and is using its resources to fuel growth. With the right mix and a positive net asset position, a business is in a much stronger position to succeed.

But before we get into the details of what a healthy balance sheet looks like, let’s get back to basics.

Back to basics – what is a balance sheet?

In the simplest terms, a balance sheet is a statement of a company’s assets, liabilities, and equity at a particular point in time. This can include:

Assets: cash, inventory, machinery, property
Liabilities: accounts payable, loans (bank/finance), taxes, shareholders loans (in/out), customer prepayments/deposits, accrued expenses
Equity: retained earnings

The balance sheet is a key financial statement that’s used to help assess the financial health of a business.

Structured around the basic accounting equation where assets are on one side, and liabilities with shareholder equity on the other, balance sheets contain important information to help calculate key financial ratios. Think of it as a snapshot of your company’s financial health at a given point in time.

What’s considered a strong balance sheet?

There are few tell-tale signs of a strong business, and a strong balance sheet is where you can generally find them. Not sure what’s considered ‘strong’ or ‘healthy’, or what to look out for? Here are some key indicators.

A positive net asset position

A positive net asset position is a measure of how a business is performing. This highlights whether a business is profitable and whether these profits are being reinvested back into the business. Companies with a positive net asset position are better able to sustain themselves during tough economic conditions and can make attractive candidates for working capital financing.

The right amount of key assets

Assets work best for a company when they’re actively providing value. For example, too much inventory can be a sign that stock isn’t moving quickly enough and highlights an inefficient use of cash. A low number of ‘stock in hand’ days, however, can be a sign of a well-managed asset and a business that’s getting this balance right, pending the specific industry of course.

More debtors than creditors

Having more money owed to your business than your business has owing is a sure sign of a healthy balance sheet. In fact, it’s one of the key indicators that your business is solvent. However, it’s necessary to take a deeper dive to understand inflated positions on your debtors and/or creditors. Ask yourself:

What terms are you offering your customers?
What terms have you been granted by your suppliers?
What is the ageing on the receivables and payables? Poor ageing on the receivables may signal invoicing issues or customers not paying on terms. Stretched creditors could reflect a cash flow issue in the business.

Your debtors and creditors are key assets and liabilities in the business balance sheet. It’s critical they are nurtured based on this level of importance.

A fast-moving receivables ledger

Slow-paying debtors can strangle the cash flow of a business. Ideally, cash flow would be moving relatively quickly. If not, this could be an area worth looking into. Why not consider early payment discount advantages or Debtor Finance?

Need a quick snapshot of your cash flow? Here’s how to calculate your working capital from your balance sheet: Working capital = current assets – current liabilities.

A good debt-to-equity ratio

Having a good debt-to-equity ratio means your company has enough shareholder equity to cover debts. This is especially important in the event of an economic downturn.

Can your business cover its debts in the event of a downturn? Here’s how to calculate your debt-to equity ratio from your balance sheet: D/E ratio = total assets/total liabilities.

A strong current ratio

Sometimes known as the ‘liquidity ratio’, the ‘current ratio’ is determined by dividing the business’s current assets by its current liabilities. This ratio is a key indicator of liquidity as it determines the business’s ability to pay its short term liabilities with its short term current assets. When calculating the ratio, anything less than 1 is an indicator that the business may have a liquidity issue. This is not itself a sign that the business is about to collapse however. It actually alerts the business that it’s in need of additional liquidity, such as Trade or Debtor Finance, to close the cash flow gap.

Why is it smart to have a healthy balance sheet?

A healthy balance sheet reflects an intelligent business – a business where there is the right balance between debt and equity, and the management team is using debt to propel the business forward.

One of the key indicators of a smart business is how effectively it uses its resources. While having assets is undoubtedly a positive, having too much equity tied into your cash isn’t necessarily a sign of an efficient business. Shareholders are primarily looking for a higher return on their investment, and to do this their funds need to be put to good use.

Using debt to invest in more acquisition-generating and brand-building activity is a key consideration when assessing the strength of a business. It’s an efficient way to manage resources and shows confidence in the future growth of the business. With the right mix of debt and equity, you can invest in activity to grow revenue and profitability. And that’s where you can hit the sweet spot.

Ways to make your balance sheet healthier

If you’re looking to create a healthier balance sheet for your business, there are some tried and tested tactics that you can explore. You can:

Improve your inventory management. The cost of holding onto stock is high! If you have stock that isn’t moving or is obsolete, look into ideas to move it out the door. Consider sales, discounts or promotions to help turn the stock into cash that can be re-invested elsewhere. Untried distribution channels, including online marketplaces and platforms could be a genuine option also.
Review your collection procedures. Are your debtors taking too long to finalise their payments? If so, this is costing you and impacting your balance sheet. Reviewing debtor payment terms, offering early payment discounts or reviewing your systems can be some ways to help bring down your debtor days. It may be a good idea to read our tips for improving debtor management.
Assess non-income producing assets. Are these assets providing value to your business or are they just ‘lazy’ assets? If they aren’t being used to generate income or don’t have the potential to do so, selling them can be a quick way to pay down debt and improve your balance sheet.

By looking into these parts of your business, you can make some significant changes to the way you operate and improve the strength of your balance sheet. This means when you’re in a position to secure more finance, you’ll be better prepared.

Your balance sheet and securing finance

Are you looking to secure finance to help grow your business? Now that you know the importance of a strong balance sheet, it’s important to know that what healthy looks like will depend on the type of finance you’re looking to secure. Octet offer two primary sources of supply chain finance – Trade Finance and Debtor Finance. This is what we generally consider when providing finance under each facility:

Trade Finance

Trade Finance works as a line of credit businesses can access to help pay suppliers. There are a few key indicators we consider when assessing Trade Finance, which revolve around the financial health of the business. This means reviewing current and historical financial performance, as well as obtaining insight into the Balance Sheet position.

We also consider:

What is the net tangible asset position? This will help determine lending capacity and the resulting credit limits.
What levels of inventory does your company hold and what is the turnover? A quick turnover indicates efficient stock management and healthy cash flow.
What equity or loans have the shareholders of the business introduced or taken out?
What are the carried forward profits or losses of the business?

Want to know what other eligibility criteria we consider? Read about our Trade Finance facility here.

Debtor Finance

With Debtor Finance, receivables are used as collateral and, with confidential Debtor Finance, we also take control over the debtor’s receipts. As a result, we consider a broader range of factors when assessing suitability, including:

What do your receivables look like? What is the spread of debt, the age of the receivables ledger, and who are the debtors?
Does your industry have a clear sales process, with clear proof of delivery or hours performed?
Is your business trading profitably? If not, what initiatives are in place to improve the situation?

Want to know what other eligibility criteria we consider? Read about our Debtor Finance facility here.

Want to know if your balance sheet is healthy?

Get in touch. And make sure to read our tips for improving debtor management too.

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.

Business cash flow funding for rapid growth

Posted on November 22, 2023May 20, 2024 by Duncan Khoury

A solid business model, loyal customers and growing demand for its products — it was the ideal formula for this thriving and growing telecommunications parts and components wholesaler. But the business’s available cash flow couldn’t support its desired growth.

The wholesaler was on a growth trajectory and didn’t want to slow down, so it needed a finance partner who could respond quickly, tailor a business cash flow funding solution and provide finance immediately. Enter Octet.

Growth trajectory outpaced existing working capital

This Western Australian-based network and telecommunications parts wholesaler has established itself as a trusted source of products and components. The business supplies other professionals in the electrical and communications sector in Western Australia, South Australia and Victoria — and it’s growing fast. Unfortunately, its available capital couldn’t support that level of growth.

“The business is poised to more than triple the sales growth achieved in 2022–23,” says Nigel Thayer, Octet’s WA Director of Working Capital Solutions. “It needed a flexible cash flow funding line to achieve that.

“Due to the month-on-month sales growth, the business had also struggled to meet its tax obligations on time, so it had a repayment plan in place. It needed a financier that understood the business and could support its growth aspirations.”

Telecommunication parts with bright lights and yellow cables, with an overlay of mind map. — This Western Australian-based telecommunications wholesaler has established itself as a trusted source of products and components.

Business cash flow funding solutions for now and into the future

A trusted finance broker recommended Octet. “After analysing the business’ receivables ledger and financial data, we organised an introductory and discovery meeting,” says Nigel.

We wanted to understand not only the business’s current funding needs, but also its growth forecasts. “We were eager to ensure we could implement a product that catered to its funding needs now and into the future.”

Our Debtor Finance and Trade Finance solutions did just that. “We proposed and approved a notified invoice discounting line with a $600,000 funding limit,” says Nigel. “This provided the business with a line of credit, including an 85% advance rate against the ongoing receivables ledger, which means it can access up to 85% of its invoices as cash within 24 hours of customer sales.

“We also added a small trade finance facility with a $40,000 limit. This allows the business to pay international and Australian suppliers more immediately with up to 120-day repayment terms to Octet.”

Immediate and flexible funding supports expansion

Rapidly growing businesses need finance partners who are responsive, flexible and fast. “We had our meeting booked in with the business before other lenders had even responded to its request to meet,” says Nigel. “And our offer was very competitive.”

The business needed to be confident that its finance partner could approve and settle a new facility and provide the necessary funding for its rapid growth straight away. We delivered.

“Upon settlement, the business could immediately draw on the facility. This provided it with an instant cash flow boost against its existing receivables ledger.”

The business used this to pay its key suppliers to increase stock and meet the growing customer demand.

“Since joining Octet, it’s been operating with a superior cash flow position, taking away the growing pains it was suffering due to a lack of capital. With the enhanced cash position, the business can now take on larger orders and pay their suppliers on time,” Nigel says.

A finance facility that grows with the business

Octet’s Debtor Finance solution is designed to meet the business’s short- and long-term needs. “We structured the facility to enable an increased level of funding that coincides with the business’s sales growth,” says Nigel.

Our responsiveness and ability to provide comprehensive solutions tailored to the business were amongst the keys to its recent growth and success. “Put simply, we listen to our clients’ needs and provide solutions that meet those needs,” says Nigel. “We don’t just look for the large transactions. We can provide sub-$1 million debtor finance facility limits and can include tax repayment aspects for those businesses that need it.”

Realise your business potential and grow with Octet

Looking to grow? Is your current business cash flow funding solution holding you back? We help businesses in a variety of industries, including IT hardware and equipment, healthcare, transport and labour hire.

Our team of specialists can create working capital and payments solutions based on your unique needs. Contact us today to discover more.

Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgement. 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 judgement as at the date of publication and are subject to change without notice.

Factoring and invoice discounting case study: putting the people power into this fast-growing business

Posted on October 10, 2023May 20, 2024 by Duncan Khoury

Eager to continue its impressive growth trajectory, this national labour hire business was seeking a finance partner that could empower its evolution and ensure its success into the future.

This fast-growing business – which services the engineering, manufacturing, logistics, construction, beverage and food production industries – needed to access fast and flexible funding by leveraging the value of their outstanding invoices. Labour hire companies often look to debtor finance facilities such as factoring and invoice discounting, as these solutions enable them to pursue growth opportunities while meeting their ongoing business cost obligations.

That’s where the traditional banks had faltered, and Octet stepped in. Octet’s debtor finance and trade finance solutions gave this profitable and successful industry leader the flexibility to stay on its upward trajectory.

Keeping up with ongoing growth since 2015

Starting as a humble husband-and-wife labour hire startup in 2015, the business now has a national presence, turning over $30 million in 2022. It’s set to almost double that figure in the 12 months ahead.

With such incredible growth, the business outgrew its relationship with a big bank, says Dan Verdon, Octet’s NSW Director of Working Capital Solutions.

“They had a facility with a major bank, but because they were growing so quickly, the bank found it very difficult to increase limits in line with the business’ requirements,” Dan says. “So, in this case, the bank simply couldn’t keep up with the pace of growth, and by the time they were approving a new limit, the business would need another new limit.”

With an ambitious goal of “never saying no to new business, or more business from existing clients”, the company was essentially forced to go against their values in rejecting new work because of a working capital shortfall. A labour hire debtor financing solution was needed. Also generally recognised as ‘invoice financing’, ‘invoice discounting’ or ‘confidential invoice factoring’, this type of finance solution allows for accelerated business cash flow and rapid growth.

Providing solutions for continuing growth

The company’s finance broker and accountant suggested Octet might be a good fit. Dan says, “They identified that their client needed more flexibility and speed from a lender. They did go to market with a few options, but they felt that our product, service and platform would suit their unique needs best.”

The bank attempted to retain the client with a $4 million facility, which they then increased to $6 million, but it still wasn’t enough. Octet provided an invoice discounting facility with a $9 million limit and a trade finance facility with a $100,000 limit.

Two colleagues wearing hard hats and hi-vis discuss factoring and invoice discounting with a laptop in a large warehouse space — Debtor finance facilities, such as factoring and invoice discounting, give businesses the flexibility for rapid growth

No more saying ‘no’ to work

In the labour hire industry, if you’re not paying your wages on time, then you don’t have a business, Dan explains.

“The client’s main expenses are, of course, their outsourced staff wages. They pay wages every week. And the businesses was growing so quickly they were concerned that they wouldn’t be able to meet their increasing wage bill with the existing bank product.”

That meant saying “no” to any new work that was beyond the limits of their existing facility.

Octet’s flexible invoice discounting facility critically gave the business the ability to say “yes” to taking on more work. As Dan says: “It’s pretty simple stuff when it boils down to it.”

More spectacular growth ahead

With the power to say yes to new opportunities, this labour hire client is set for a sustained period of outstanding growth.

“The great thing is that Octet can and will grow our finance solutions with the client’s requirements,” Dan says. “Where the fundamentals of the business meet our product criteria, which they did in this case, then the actual lending limit simply follows business growth. We find that this makes for very satisfied and loyal clients, not just in the labour hire game, but across a range of industries.”

Grow your business with Octet

Octet helps businesses overcome challenges and power growth in a range of industries, including labour hire, manufacturing and transport.

Speak to our team of working capital specialists about our innovative and flexible debtor finance solutions today.

International business payments: tailored solutions for your business

Posted on September 13, 2023May 20, 2024 by Duncan Khoury

Australian business owners, leaders and entrepreneurs who transact internationally continue to face challenges due to the limitations associated with traditional finance facilities and credit card usage. However, OctetPay is redefining the landscape in an effort to make international business payments more efficient – so established and growing Australian businesses can thrive in the expanding global marketplace.

We spoke to Octet’s Head of Marketing, Duncan Khoury, about the future of business foreign exchange and payments.

A fresh option: seamless international money transfers for businesses

There are approximately 2.4 million businesses in Australia, and many of those trade and transact internationally. Add to that the fact that our nation’s local enterprises have a total foreign business currency exposure of $2.39 billion, and it’s clear business foreign exchange services are needed now more than ever before.

With US giant Amex recently announcing the decommissioning of its FX payments product outside of the United States, many businesses have been forced to seek new and reliable ways to seamlessly pay both their international and domestic suppliers.

“There are potentially hundreds of thousands of Australian businesses being impacted here,” Duncan says of the Amex move. This is where Octet has emerged as a supplier payments game-changer. The OctetPay service provides businesses with a transparent supply chain platform for swift and secure cross-border payments.

FX for business: OctetPay is the solution

OctetPay is breaking new ground in the international business payment sector by streamlining transactions and overcoming cross-border payment issues. Using an intelligent supply chain platform, OctetPay enables users to transact with confidence.

Duncan says there are two broad types of business payment requirements: domestic and international, and OctetPay can manage both.

“A lot of the providers out there are centred more around domestic payments. OctetPay has two key points of differentiation. One is that it is more geared towards being a fast and efficient international payment product, and two, is the nature of the supply chain platform itself. Once you have onboarded your suppliers onto the platform, and you start transacting with them, it’s seamless, secure and fast.”

So, what are the other benefits of choosing OctetPay?

Registration is easy: To register with OctetPay, all you need is a company ABN, bank account confirmation and your current Australian driver licence.
Straightforward and streamlined: Octet’s platform is compatible with major card brands, including Visa, MasterCard and Amex, so that you can make payments using your chosen credit and bank debit cards. As an added bonus, you can still earn rewards points or cashback rewards whilst paying regular supplier invoices.
Ideal FX for business: Octet is able to pay suppliers in 68 countries, using up to 15 currencies including USD, EUR, GBP, JPY and NZD. Your card information is at the ready, regardless of the time of day. You choose the funding split and currency pair, and in one simple click, lock in your ideal foreign exchange rate. Who doesn’t like price predictability?
Security: OctetPay integrates seamlessly with our supply chain platform for added trading partner payment security.

Octet makes business easier

To create a streamlined and user-friendly experience, Octet’s other working capital solutions can work cohesively with OctetPay in order to help your business thrive in a competitive market.

Octet’s debtor finance solution is an efficient tool in enabling you to access unpaid business invoices as an immediate cash injection. In fact, we can help you convert up to 85% of invoices to immediately boost cash flow.

Also worth consideration is our trade finance facility. It’s a great way to bolster your business’ purchasing power, with a revolving line of credit, allowing up to 60 days interest free and 120-day repayment terms.

Power your growing business

Business money transfers and supplier payments have never been so easy. OctetPay gives you the power to pay, no matter where in the world your suppliers are located. Speak to our team of working capital and payments experts, or register online today.

Invoice financing: Powering growth for Australia’s fastest growing FMCG

Posted on September 1, 2023May 20, 2024 by Duncan Khoury

In the dynamic world of fast-moving consumer goods (FMCG) and logistics, growth and efficiency are the lifeblood of success. This is especially true for a rapidly expanding Australian promotional logistics company, which found itself in need of an invoice financing solution to fuel its ambitious plans. Also known as ‘accounts receivable financing’, ‘invoice factoring’ or ‘debtor finance’, the solution allows for accelerated business cash flow and rapid growth.

Via a strategic partnership with Octet and a tailor-made debtor finance facility, the company overcame its financial challenges and soared to new heights.

Navigating growth in the FMCG arena

This Australian FMCG business has enjoyed great success. However, its fast rise hasn’t come without some unique challenges. Time and resources are crucial for FMCGs, and as orders surged and new opportunities emerged, the company was confronted with the need for substantial and reliable working capital. Traditional finance avenues proved slow and inadequate, threatening to stunt the company’s clear growth potential.

Facing this challenge head-on, the business sought a finance partner who understood the intricacies of their industry and could provide swift and flexible solutions. Enter Octet.

A tailored approach to funding growth

Octet’s experienced team delved into the company’s unique situation, recognising that more than a ‘one-size-fits-all’ solution would be needed. Drawing on their deep understanding of FMCG finance requirements, Octet proposed an Australian debtor finance facility. This solution would unlock the working capital in the business’ outstanding invoices, providing an immediate stream of funds to sustain growth momentum.

Dan Verdon, Octet’s NSW Director of Working Capital Solutions, explains. “The business’ main customer is a multinational food and beverage conglomerate, which sometimes represents up to 50 per cent of their entire receivables ledger.

“The company joined Octet in February 2023. We’ve since been able to provide the business with a debtor finance facility that has given them the funding they required without restricting any concentration percentage, which was key for them. Their previous financier couldn’t get comfortable with funding 50 per cent to one customer – so in that area, we’ve really made a material difference.”

A blurred grocery aisle from the perspective of the person behind the trolley — The FMCG company needed a finance partner that could give them the cash flow boost they needed to keep growing

Ambitious growth projections established

Thanks to the cash flow boost and funding provided by Octet, the company’s growth trajectory can continue unhindered and its operations have accelerated due to the newfound financial flexibility.

“Initially, the facility limit was $3.2 million, and that’s already been increased to $4 million,” Dan says. “When they first became a client, annual revenue was $16 million. The business is now turning over $19 million, so that’s a pretty significant increase.”

Personalised service makes all the difference

Octet understands the importance of offering a personalised supply chain finance service. While traditional lenders often have client managers overseeing portfolios upwards of 60 clients, Octet supply chain finance specialists oversee significantly fewer, leaving more time to focus on each client’s unique cash flow requirements.

For our business clients, timing and agility are both crucial. Octet is able to swiftly tailor working capital and supplier payment solutions that meet their unique supply chain requirements.

“The key thing to understand is growth, and the dynamics of business growth,” Dan says. “Most of our clients using receivables finance are going through a growth phase of some variety. They don’t have the working capital or cash flow efficiency to take it to the next growth stage – that’s where we come in.”

Unleash your business potential with Octet

Octet’s know-how and customised supply chain finance solutions unlock remarkable growth for our clients across a range of industries. So what’s next for your business? Discover the benefits of debtor finance, trade finance and our other intelligent supply chain finance solutions today.

What are debtor days? A guide to accelerating customer payments

Posted on August 20, 2023May 20, 2024 by Duncan Khoury

Cash flow is a critical factor for any business. The time it takes for invoices to be paid is commonly referred to as debtor days, and this is a significant factor when determining the inflow of customer payments.

Managing this period so payments are punctual and consistent can be challenging. However, to accurately assess your business’s finances, you must understand how to calculate debtor days.

In this useful guide, we’ll explore the simple formula for calculating average customer payment time. Plus, we’ll look at strategies to accelerate and optimise cash flow. Leveraging market-leading supply chain technology and finance solutions can help your business on the path to consistent cash flow, and ultimately, sustainable growth.

Understanding debtor days

Nigel Thayer, Octet’s WA Director of Working Capital Solutions, explains how important it is for businesses to understand debtor days. “As an indicator and measure of cash flow, knowing your debtor days can help with cash flow planning, customer management and other internal issues.”

To calculate debtor days, businesses can average them based on monthly, quarterly, or annual data with a receivable days formula. This formula divides the average receivables ledger balance by average daily sales.

Here’s an example of how to calculate debtor days on a monthly average:

Debtor Days = (Total Accounts Receivable / Average Daily Sales)

Total Accounts Receivable = (Accounts Receivable at the beginning of the month + Accounts Receivable at the end of the month) / 2
Average Daily Sales = Total Annual Sales / 365 days

For example, John Smith & Co had $500,000 in accounts receivables for the last month. They also have annual sales of $4,000,000 (or $10,958.90 a day). Therefore their average debtor days is 45, and to maintain healthy cash flow, the business needs to collect its outstanding debts in at least 45 days on average.

This formula helps you determine the average debtor days, that is the average number of days it takes for your customers to pay their invoices.

Why do businesses monitor debtor days?

Monitoring debtor days is part of the overall management of your business’s finances, and understanding them allows you to follow trends and better plan operationally.

“The higher the debtor days, the greater the gap between incoming business revenue versus business outgoings (or costs),” Nigel explains. Common fixed and variable outgoings, including wages, fuel, rent, stock, and loan repayments, must be paid promptly for a business to sustain itself, so adequate and flexible cash flow is needed.

“Without sufficient working capital or access to funding, a business with higher debtor days could find it difficult to meet the business outgoings,” Nigel says. Serious financial issues can arise without active monitoring in this area, including bad debts and limited cash flow.

What affects debtor days?

Understanding your business’s debtor days can help to manage cash flow and indicate key trends. Take particular note of these factors which can impact the time it takes for customers to pay invoices, causing debtor days to be higher than usual:

consistent customer disputes about work performance or delivery
increases or decreases in revenue for the period
inaccuracies in invoicing and delays in payment processing
an anomaly in the receivables (one customer skewing the figures)
absence of good receivables management or collection practices in-house
the number of credit notes or refunds issued in that period
generally slower-paying customers
issues with technology and automation
key staff turnover

How to accelerate payments and reduce debtor days

Reducing debtor days is easier once you’ve identified the factors impacting them. After determining the cause of an increase, these strategies can be useful in accelerating payments:

Collection procedures

“Establishing regular practices around follow-ups and reminders on overdue accounts (usually automated within your accounting software) can accelerate payments from your top list of customers,” Nigel says. Other strategies include credit guidelines, stop-credit procedures and allocating sufficient time and attention to collecting overdue accounts.

Strengthening customer relationships

Improving customer relationships can simplify the process of negotiating payments and managing debtor days. Ways to encourage better payment terms include open communication and accessible customer support, offering multiple payment options (including credit cards) and asking for customer feedback.

Automation solutions

It’s easy to lose track of receivables management amongst all the other considerations and priorities within a business. Taking advantage of technology and automation means reducing the effort — and improving the consistency — of your business’s finances. “Technology doesn’t replace the need for having an active relationship with your customers, but it does help you manage the customer cohort better from a payment collection perspective,” Nigel explains.

Debtor management solutions — like Octet’s debtor finance product and platform — can help. Our supply chain management platform, digital wallet and global network make automating and streamlining your finances easier.

“Gaining a reduction of even two or three debtor days can have a significantly positive effect on cash flow,” Nigel says. “Businesses should be adopting all, or as many of, these strategies as possible.”

Take control of your cash flow with Octet.

Managing debtor days is made easier with Octet. Speak to our team of working capital specialists about innovative debtor finance solutions and discover how leveraging intelligent technology can optimise and accelerate your cash flow.

Considering invoice finance? Here’s what you need to know

Posted on May 12, 2023May 20, 2024 by Duncan Khoury

Keen to understand if your business would benefit from invoice finance? If you’ve heard that term and others such as debtor finance and invoice discounting, but want to know more, Sam Ralton, Octet’s Director of Working Capital Solutions, is here to help.

What are invoice finance, factoring and invoice discounting?

Invoice finance products allow you to access funds by using your business’s outstanding invoices as collateral. “There are a number of terms used to describe these products,” says Sam. “Invoice finance, receivables finance, debtor finance – they all offer essentially the same facility, which looks at the receivables ledger or the invoices that are outstanding in a business and funding against those.”

Sam explains. “An invoice discounting facility is simply funding against the ledger. Factoring is a little more intense in that it reviews the day-to-day invoices. Factoring is a disclosed facility, where the finance company is effectively taking on the role of collecting outstanding debts on behalf of the business in most cases.”

What’s the difference between invoice financing and factoring?

Today, reputable finance providers like Octet offer tailored invoice (or debtor) finance products and collaborative partnerships. “We have supply chain finance managers that are constantly in discussions with clients, looking for any cash flow issues or opportunities that may arise and assisting with these.”

Why would a business choose invoice finance over traditional finance?

What are the advantages of invoice finance over, say, a standard bank loan? Sam explains.

“Banks focus on ‘bricks and mortar’ assets and are very keen on taking property security and effectively offering a mortgage when it comes to business lending,” he says. “Not all businesses have sufficient property assets to use as collateral, nor do they generally want to use their Director’s personal assets as security.

“Invoice finance is effectively funding against the biggest asset in most businesses – the receivables ledger (cash owed to a business by its debtors or customers). That ledger typically sits there as an asset, not doing anything until paid pursuant to agreed payment terms. Because an invoice finance facility actually uses that asset as its security for funding, it’s removing the need for directors or owners having to put up property or other security.

“The banks are also very slow to move,” adds Sam. “They can take more than six months to approve finance applications.” Invoice finance applications, on the other hand, can be approved within a matter of weeks, allowing businesses to embrace opportunities quickly.

When should a business seek invoice finance?

There are several reasons why a viable business would look to invoice finance. They might have cash-flow issues (due to longer payment terms), need to restock quickly but are waiting for invoices to be paid before they can, or simply want faster moving cash flow to open various growth opportunities.

“Most businesses that speak to Octet about invoice finance have high supply costs,” says Sam. “Let’s take the example of a labour-hire company, which will raise an invoice after the work has occurred. But they must pay staff before their invoices are paid.”

Invoice finance allows these businesses to fund their workforces without having to wait for debtors to pay. This is particularly helpful in the growth stage of a business.

“These facilities grow with the business, because as you raise more invoices, you can generally access more funding. And as a business winds down, the facility pays itself out so the directors aren’t left with a large hole that takes away their property.”

What is the rate for invoice financing?

The costs involved with invoice finance vary depending upon the provider and the type of product. And, in general, there are two types.

There’s a disclosed structure where the business’s debtors know a financier is involved in collecting invoices. And then there’s a confidential structure where the business has more control of the process and debtors don’t know a financier is involved. The financier’s workload and therefore cost to the business vary depending on whether a business uses a confidential or a disclosed facility.

“Generally, there’s an interest component on the borrowed amounts, and then there’s a line fee or service fee,” says Sam. “There’s a bit more work involved in disclosed invoice finance because the financier is constantly reviewing the ledgers. Cost also varies depending on the business turnover and workload required.”

What are the risks of invoice finance?

Those unfamiliar with this type of funding might be wary of the work or costs involved. “There’s a fear of cost,” says Sam. “But the cost of invoice finance is probably only slightly more than a standard mortgage or an overdraft facility.”

The suitability of this type of facility depends on your business and its needs. A negative experience with invoice finance is often the result of choosing the wrong financier or using a product not suited to the business.

So, how do I find a reputable finance provider?

Some finance companies offer quick fixes, which Sam advises businesses to avoid.

Is invoice finance the answer?

Octet has been providing working capital solutions, including invoice finance, since 2008. How can we work with your business? Contact our team to discuss a tailored approach to help you reach your business goals.

Labour hire business works through growing pains with rapid finance solution

Posted on April 25, 2023May 20, 2024 by Duncan Khoury

A West Australian labour hire provider was experiencing a depletion in cash flow due to significant sales growth.

Although flourishing, their existing bank would not increase their overdraft limit. This lack of cash flow was causing missed growth opportunities, and they needed another solution fast.

Octet worked quickly to propose and implement a Debtor Finance (invoice discounting) cash flow line, enabling the business to accept new clients and grow profits. Discover how the speedy response allowed this fast-growing labour hire company to achieve its potential.

A booming labour hire business with no room to grow

This rapidly developing labour hire agency providing staff to the Australian oil and gas industry needed more than just steady revenue to succeed.

After experiencing significant growth, taking on new customers and expanding services, they found that their outgoings weren’t in sync with cash flow requirements. The company could not comfortably fund the initial outlay on operations.

As a result, they were losing revenue and new opportunities, despite having a well-performing labour hire business. Nigel Thayer, Director of Working Capital Solutions for Octet, explains.

“In short, their sales growth had outstripped their available working capital position. An innovative facility was required to smooth out the business’s cash flow and enable funding while financing the overall business expansion.”

Immediate funding and a long-term growth solution

After an introduction via a finance broker and an initial meeting, the client immediately saw how Octet could enable their business to grow without restraints.

“Before their introduction to Octet, the client had an overdraft facility from their bank,” says Nigel. “Initially, it had met their business requirements, but it was clear they had outgrown the overdraft limit. Within 24 hours of reviewing their financial information, Octet proposed a $2 million Confidential Invoice Discounting funding solution.”

This solution would allow the client to access a clear line of credit leveraged against their receivables, funding the growth of their FIFO labour hire and other contractor payroll.

And most importantly, this type of funding solution allows businesses to get up to 85 per cent of their invoices paid within 24 hours.

Impressive revenue growth in the first year

The labour hire solutions company finally had the freedom to grow, meaning they no longer had to juggle cash flow, turn away new customers or limit their capacity with existing clients.

Crucially, the business’ growth was financed by the labour hire debtor financing solution implemented by Octet — not the director’s property or assets.

“Business revenues for the group have been $9 million per annum,” says Nigel. “Today, they are on target to reach over $12 million in revenue in this financial period.”

Better still, the client had nothing but praise for the application process. Octet was there to explain every step and demonstrate how the Debtor Finance facility would integrate within the proprietary supply chain management platform from the outset.

A future full of opportunities

Octet was able to provide a successful outcome for a business in an important and growing sector in Australia.

With Octet’s debtor finance solutions, this client gained the confidence to take on new customers and more significant crew placements. And with fewer restrictions on future growth, they can distinguish themselves as leaders in the WA labour hire market.

Explore what’s possible without cash flow limitations

Nigel urges businesses unable to realise their full potential due to restrictive traditional lenders and cash flow issues to contact Octet.

“Octet can structure a solution for your business that solves your immediate cash flow issues while complementing your growth plans,” he says. “Let us tailor a working capital solution for your business.”

Discover your business’s potential with Octet

Need a structured receivables finance solution to help you scale your business? Contact us today.

Working capital solutions for successful business growth

Posted on March 23, 2023May 20, 2024 by Duncan Khoury

Your business is strong. Demand is growing. You’re ready to take your company into its next phase. But how do you make the transition successfully?

Moving through various phases of business growth can be a rewarding – and challenging – time. When risks and opportunities are abundant, you need the right finance partner to ensure success. Our key recommendation? Look for flexible finance solutions to ensure your business can quickly capitalise on new opportunities.

What is business growth?

Ask any business owner about their goals, and the answer will inevitably relate to growth. Whether it’s a vertical expansion (like venturing into related products and services) or horizontal diversification (such as bringing a traditional brick-and-mortar retailer into the ecommerce space), there are many ways a company can grow.

But these periods of change come with uncertainty, particularly around financials.

Brett Isenberg, Co-CEO of Octet, believes the most critical time for a business to be on top of its finances is during a growth phase.

“It’s critical for all key staff and departments, not just the finance team, to understand and value the numbers,” he says. “This is especially true for high-growth businesses where there are both significant risks of failure and significant opportunities.”

How to promote business growth

So, what do you need to ensure your business growth phase is successful? While every business is different, successful growth usually requires an appropriate and sustainable funding or working capital base, especially during the early stages. But obtaining funding is also one of the biggest challenges.

For businesses planning a growth phase, it’s important to look for flexible, secure and sustainable funding options.

Smooth business growth is possible with tailor-made working capital solutions such as debtor finance and trade finance.

When researching the best finance solution for your growing business, Brett recommends looking for products that are “designed to cater for common fluctuations in business supply chains”.

“For example, our debtor finance facility grows and flexes with a business’s sales volume and enables further growth, giving you early access to a large percentage of your accounts receivables,” he says.

Octet’s recent, successful partnerships with leading Australian businesses, including Builders Steel Direct and Vinomofo, demonstrate the possibilities. Using our supply chain finance solutions, these companies were able to grow to meet demands and seize critical opportunities when they arose.

“Many of our clients and members are rapidly growing businesses that have only been operating for less than ten years,” Brett says. “These are businesses that have demonstrated remarkable growth through their product, marketing and overall business strategy.”

Why fast-growing businesses partner with Octet

Traditional finance solutions (provided by banks) and government initiatives like the Australian Business Growth Fund may appeal to companies entering a growth phase, but these avenues often come with burdensome conditions and lengthy approval processes.

In contrast, Octet delivers flexible products and specialised support for high growth periods. Partnering with us offers advantages that business growth funds and other finance providers rarely deliver, including:

Tailored supply chain finance solutions. “Our unique supply chain finance management platform and technology gives better financial visibility, supplier transparency, and added security,” Brett says. These factors are especially crucial during higher business growth phases and for international transactions.
Flexible lines of credit and criteria. “Octet determines funding limits by better understanding the business’s balance sheet and financial strength – including any growth plans,” Brett says. We offer flexible lines of credit that grow with your business, and can combine Trade and Debtor Finance funding limits to meet increased customer demand.
Streamlined processes and dedicated service. We give businesses the tools and confidence to grow while providing dedicated service and support. As the key elements of your supply chain network connect through Octet’s platform, processes become streamlined and more efficient. This technology is then backed by our experienced team of supply chain finance specialists.

Brett urges business owners to explore all finance options – even the unfamiliar ones – before entering a planned growth stage.

“The reluctance to pursue non-bank debt financing is sometimes borne of a fear of the unknown and the multitude of finance options available,” he says. “Speak with your industry peers, a finance consultant or your business’s accountant to look at the pros and cons of every solution.”

Giving you the power to grow

Octet’s working capital solutions can help your business to accelerate growth and seize opportunities as they arise. Contact our team today for a tailored working capital approach to achieving your business goals.

All things invoice finance: unlocking the power of your receivables

Posted on February 27, 2023May 20, 2024 by Duncan Khoury

Staring down the barrel of a tenth consecutive interest rise, 2023 has already seen compounding pressure on the Australian SME market, due to global inflation remaining high and below average growth. This juggling act for businesses to combat increased costs, is often coupled with slower paying customers across the board.

Wherever your business is positioned on the suppply chain, you’ve no doubt seen first-hand the pressure this has put on your working capital and cash flow management. Spikes and dips in demand create funding gaps, impact cash flow, and can make it difficult for businesses to meet their financial obligations on time.

Invoice (or Debtor) finance may help manage these challenges. As a flexible financing solution that unlocks cash fast it can bridge funding gaps, keep cash flowing, and capture new opportunities.

Let’s take a closer look at what invoice financing is and how it can power your business.

What is invoice finance?

Invoice finance is a source of funding in which you can use the money owed by your customers as collateral for gaining early access to a meaningful portion of those funds from a third party financier. A flexible finance option, it can provide fast cash flow to your business and help you manage your working capital.

How does Octet Invoice Finance work?

Make the deal – You sell something to another business (who becomes a debtor).
Raise the invoice – You send the invoice to your debtor, and when you’re ready to make a request for funds upload it to the Octet Platform.
Receive funds within 24 hours – Octet will provide you access to up to 85% of your unpaid invoices via a flexible facility, and let you draw down on what you need.
Your debtor pays – The payment goes into a nominated account that we manage.
You receive the balance – We pay you the remaining balance, minus our agreed fees.

When does invoice finance work best?

For certain industries and business models, having an invoice finance facility in place can give you a huge advantage. Here are some examples where invoice finance can be a particularly great fit:

Long customer payment terms – Long payment terms and payment cycles, with potentially long delays between selling a product or service and receiving the cash for it.
Seasonal sales cycles – Sales and cash peaking throughout the year, but costs remaining consistent regardless of the season.
Fast growing – Facing an increasingly strong demand, but lacking the cash flow needed to meet it.
Lack of physical assets to provide as security – Especially relevant for service based businesses, newer businesses, and those that are rapidly growing.
Reliance on balance sheet – Depending on the structure of your business, keeping healthy balance sheet metrics could be a key consideration.
Desire for early payment discounts – Hoping to negotiate early payment discounts with your suppliers, but lacking the cash needed to secure them (an invoice finance facility can provide the funds needed to help secure these deals).

These examples can apply to businesses across a wide range of industries. The most common industries to benefit from invoice finance include:

Different types of invoice finance

There are two different types of invoice finance available. You’ll need to consider both and see which is right for you.

Disclosed invoice financing is when your debtor is aware of the involvement of the finance company (i.e. Octet). Instructions to pay the finance company are included in the invoice, and funds are paid to a nominated account. The finance company also has the right to chase late payments.

The advantage of disclosed invoice financing is that it’s easier to secure. However, it can require careful relationship management with your customers as the finance company may also deal with them directly.

Confidential invoice financing is where your debtor is unaware their invoice has been sold. The finance company isn’t involved with any communication with the debtor, which continues to be handled by your business.

The advantage of confidential invoice financing is that you retain full control of the process and the relationship with your customer. However, to secure this type of financing you’ll need to meet a few more conditions as the risk to the finance company is generally higher.

Advantages of invoice finance

Invoice finance is an increasingly popular source of funding, and with good reason. Here are some of the benefits:

Fast access to cash

If you have cash flow challenges, one of the biggest problems is finding cash fast when you need it. Traditional lenders such as banks can take weeks (or longer) to approve finance thanks to their strict documentation requirements. With invoice financing, once you’re approved, you can have access to the cash tied up in your invoices within 24 hours.

Access to your money without security

If you’re looking to traditional sources for funding (e.g. banks), you may need to offer property as security and to add a loan to your balance sheet. Depending on the stage your business is at, you may not have the assets available to do this. Even if you do, taking on a loan may not be the best move for your balance sheet.

Invoice financing is an attractive and flexible alternative. By using your receivables as collateral, you can quickly access valuable cash without having to offer property as security and keep your balance sheet intact.

Improve your cash flow and power business growth

What could you do if all your invoices were paid within 24 hours? Invest in new projects? Expand your operations?

With invoice finance, you can make this happen. By having an invoice finance facility in place, you’ll improve your cash flow and have cash available to explore the possibilities and power your business growth.

Turn growing receivables into an available asset

Growing receivables can be a concern for any business. Let them grow too high, and you risk experiencing the dreaded cash crunch. With an invoice finance facility however, you can turn this asset into readily available cash and keep your business on track for high growth.

Diversify funding and rely less on banks

There are a few different ways you can finance your business, and the best method depends on your business and the activity you’re looking to fund. Using an invoice financier helps you diversify your sources of finance and spread risk.

Make your business self-replenishing

If you need to get paid before you can re-stock your products or supplies, invoice financing could be the perfect solution. With fast access to cash you’ll never have to wait again, helping you keep your customers happy and your revenue healthy.

Alternatives to invoice finance

While invoice financing is a flexible solution for many businesses, there are other options available. These include:

Internal funds

If your business has existing cash or savings, tapping into them can be a popular option as it requires no loan or interest payments. However, it can also impact your ability to pay future expenses or take advantage of growth opportunities.

Debt finance

Often provided by traditional lenders in the form of a loan or overdraft, the interest on these sources of finance is tax deductible and you retain full control of your business. You will need to consider long term interest repayments though, and whether you can provide adequate security.

Equity finance

In exchange for funding, you can offer a share in your business to an investor. It’s less risky as there is no debt to repay, but does mean you’ll need to give up ownership of part of your business.

Trade Finance

This type of finance works as a revolving line of credit that you can use to pay suppliers, and can be secured through guarantees. To be eligible, your business will need to meet minimum trading, turnover and profit periods.

Supply chain finance

A unique blend of invoice finance and trade finance, supply chain finance links buyers and suppliers to help free up your working capital. As a completely unsecured product, it’s only available to businesses with a strong profit and substantial turnover.

Power your growing business with Octet’s finance options

Intelligent businesses use finance to fuel their growth. If you want to unlock the cash in your receivables and power your growth, we can help.

Talk to us today

What are the best methods of financing a business in 2023 and beyond?

Posted on November 17, 2022May 20, 2024 by Duncan Khoury

As a business owner or director, there will be times when you need to access finance for your business.

You might need finance to grow, to buy stock or to see you through difficult times. But which method of business finance is right for your organisation? In this article, we explore some of the general challenges facing businesses, the traditional methods of business finance and some alternative financing solutions.

Why you need business finance

According to the Australian Government’s business.gov.au website, fluctuations in cash flow can have a serious effect on a business’s viability. As a result, one of the most common reasons a business seeks financial assistance is due to cash flow. But there are many other reasons why a business owner might seek funding. You might need business financing:

to help establish a new business
to purchase or lease property such as a factory or store
to expand a business or begin engaging in international trade
to purchase stock
for investment in vehicles, machinery or other tools and equipment
for research and development
during times of difficulty to help the business survive

New challenges in business finance

The global pandemic and its aftermath wreaked havoc on the world’s businesses, but when we finally emerged from COVID, business leaders and owners faced new challenges.

The smallest SMEs to the largest multinational companies felt the impact of global supply chain issues, increased costs, skilled worker shortages and ongoing global uncertainty. Record levels of inflation and rising interest rates put pressure on households, consumers and business owners alike.

According to a recent KMPG report, business leaders have also been left with concerns about staff acquisition and retention, cybersecurity and digital transformation, the disruption of remote workplaces as well as new technologies. If businesses are to survive in the future, they simply have to innovate.

There is no doubt that the way we do business has changed, and that includes finding new ways to access business finance. The good news is there are a variety of methods available to finance your business. Options range from the traditional, like loans and overdrafts, to the more flexible, like Debtor Finance and Trade Finance.

You’re probably familiar with the traditional funding options, but the more innovative types may actually suit your business better.

Let’s examine the various finance options available.

Traditional methods of financing a business

The Reserve Bank of Australia reports that since the second half of 2021, small and medium businesses have experienced relatively strong growth conditions. As a result, demand is high for business finance. But though demand is strong, businesses face many hurdles, including rising interest rates. This makes accessing traditional bank funding difficult.

So, how do you finance a business? Many business owners still default to familiar, conventional options when they need financing, and there are three basic ways to go about it. It can be achieved by:

using internal funds
organising debt finance
arranging equity finance

Each of these options has benefits and drawbacks. Let’s take a look at each.

Business Financing Method #1 — Internal Funds

As a business owner, you might prefer to fund your expenses and growth through internal funds, such as the cash and savings you already have sitting in your business. These internal funds might come from profits you’ve already enjoyed or by selling assets the business no longer needs. The main advantage of using internal business funds is that you don’t have to take on debt or repay any money to a third party.

However, internal funding or internal financing uses up your company’s available cash or assets, which may cause cash-flow problems later on when it’s time to pay expenses. It may also stifle your business’s growth by keeping you from taking advantage of opportunities that require readily available funds.

Business Financing Method #2 — Debt Finance

Financing your business through debt involves borrowing money from a lender, such as a bank or other financial institution. It most often takes the form of credit cards, overdrafts, lines of credit or loans.

On the plus side, this generally allows you to keep control of your business and profits, because no other parties have any ongoing shared ownership over your business. Plus, the interest paid is often tax-deductible.

The main disadvantage, of course, is that you need to repay the money you borrow — usually with interest. And in the days of rising interest rates, that’s of real concern. The RBA has recently indicated that not only will rates not fall in the near future, they will probably continue to rise.

So, while debt finance can be a good short/mid-term fix, it can also lead to more problems in the future. Many businesses also find it challenging to get debt finance without offering personal asset security, particularly if they’re just starting out or don’t have sufficient equity. But for an established business that is looking for funding to grow, debt finance is often a solid option.

Business Financing Method #3 — Equity Finance

The third popular business capital solution is equity finance, where an investor provides funding in exchange for owning a piece of your business. Typical examples of investors include venture capitalists (professionals who invest in existing companies) and angel investors (individuals who invest in start-ups).

This can be less risky than debt financing, as the investment isn’t a debt you need to repay.

The downside is that you lose control and ownership of part of your business. It can also be hard to find the right investors — people who are both willing to invest and who you want to share future ownership with.

Alternative, flexible business capital solutions from Octet

The pressures and challenges on businesses are changing, but so too are business owners and leaders. According to the report Where Opportunity Lies: Australia’s new small business boom, created by Xero in partnership with Accenture, a new generation of business owners is emerging.

The report shows that of the latest wave of entrepreneurs, 45% are aged under 35. Of those who started a small business recently, 37% were born overseas. Meanwhile, 36% of small business owners are women. The report also reveals that over the next decade, 3.5 million new small businesses are expected to be registered.

Without a solid credit history, this new wave of business owners might find traditional funding difficult to access and will be looking at non-traditional means to launch and grow their businesses.

Alternative, flexible business capital solutions are almost certainly the way of the future.

At Octet, we believe that businesses should ideally be able to fund themselves. Business owners and managers who can think laterally about funding are the ones in the best position to grow.

That’s why ‘funding your own business’ is at the heart of all our financing options. We offer three alternative business working capital solutions:

The right one for you depends on the size of your business and your unique needs.

Business Financing Method #4 — Debtor Finance

Debtor Finance uses the biggest ongoing asset most businesses will have: their accounts receivables. Briefly, this solution lets you convert up to 85% of your unpaid invoices into immediately available funding within 24 hours. This means you can have the funds straight away, without waiting the 30, 60 or 90 days it might normally take your customers to pay you. Just imagine how much that would improve your cash flow cycle!

Better yet, we offer this without requesting you use your property as security, which many banks require. Using the Director’s personal assets as security isn’t an issue when the property market is going well (assuming you own property). But if you’ve maxed out your property equity — or you don’t own any — you do need another option.

Our Debtor Finance solution is available to Australian businesses across a wide range of industries, from newer companies to well-established ones. Ideally, you’ll have an annual turnover of at least $1 million, and at least two years of business operation.

Business Financing Method #5 — Trade Finance

Trade Finance gives you a revolving line of credit to pay your suppliers both locally and in more than 72 countries. Again, we don’t need you to provide personal asset security. Instead, you’re generally securing funding against the strength of your balance sheet, with just a company and director guarantee.

With up to 60 days interest free and 120-day repayment terms, our Trade Finance facility is flexible too. You can use it either as your primary funding source or to supplement your current bank or other financing arrangements. So if your bank can’t offer all the funding your business needs, or you want to diversify streams, we’re happy to help.

To be eligible, your business ideally needs an annual turnover of at least $3 million to $5 million and to have shown a profit for the last two financial reporting periods.

Business Financing Method #6 — Supply Chain Accelerate

Our Supply Chain Accelerate facility is like a hybrid of Trade Finance and Debtor Finance. It links suppliers and buyers in one process to free up working capital, which you could use to invest in supply chain innovation or other business growth strategies. The supplier gets paid 100% of their invoice upfront while the buyer has 30, 60 or 90 days to repay us.

Supply Chain Accelerate is completely unsecured, with no director or company guarantees required. And because it’s an off-balance-sheet source of funding, it doesn’t interfere with you taking out other business loans.

If you’re a supplier, this facility is hugely beneficial when you deal with larger companies that have an extended payment cycle. It means you generally access the credit rating of the bigger company to get paid earlier. Meanwhile, as a buyer, you can take advantage of potential early payment discounts to pay upfront and free up cash flow.

Supply Chain Accelerate is available to larger, profitable businesses with a substantial annual turnover.

Power your business with Octet’s supply chain finance options

Every business, from the smallest enterprise to the largest company, will need access to financing at some stage in their lifecycle. Having reliable, accessible business finance is a must, particularly during times of uncertainty.

The best funding method for your business will depend on a range of factors. At Octet, we help you find the business financing solution that’s right for you. We not only power your business growth, but we also empower you as a business owner or executive with better control over your supply chain.

Our team of supply chain finance specialists have helped Australian business owners and their local and global trading partners access the funding required to succeed. And we’re ready to help you better understand your business finance options.

Ready to take the next step with your business? Let’s take it together… Talk to us today about how to finance your business.

Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgement. 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 judgement as at the date of publication and are subject to change without notice.

Disrupting an industry: funding strategy helps boost business growth

Posted on December 7, 2021May 20, 2024 by Duncan Khoury

Verus Global is an award-winning freight forwarding company that’s on a mission to bridge the gap between global giants and smaller local enterprises. The business is disrupting the freight forwarding industry using cutting-edge shipping systems and processes outside industry norms.

Customers get a real-time view of their shipping journey with complete visibility on all freighting consignments at every stage of the process.

With a commitment to transparency, streamlined shipping and minimal touchpoints, Verus Global boasts a stress-free and high quality standard of service.

The business grew fast after securing major customers in both Australia and the UK within its first year. This was four times faster than their projections, which meant they had to find additional finance quickly.

After securing funding for business growth, Verus Global has since more than tripled their sales. Now expanding their operations to new countries, they are an example of how to successfully execute a growth-led business strategy.

A fresh start with new challenges

Verus Global has already faced significant challenges since its establishment in January 2019. Operating across Australia, Hong Kong, China, and the UK, the business has dealt with major Hong Kong protests, Chinese New Year and of course, the global pandemic.

The varying impacts from different countries at different times had a major effect on cash flow and made finding the right working capital solution critical.

“We had a bit of a rough start with protests, Chinese New Year and especially the pandemic. We had China closed for an eight-week period and we still had to pay everyone’s wages – and that was just one example. It was certainly a challenging time.”

Jackson Meyer, Group CEO, Verus Global

Adding to these challenges was the impact of the Verus Global business model on cash flow. Unlike competitors in their industry, Verus Global covers all costs throughout the freight process and only invoices customers at completion of delivery.

While this approach certainly propelled their business growth, it also meant they had a longer cash flow cycle and greater working capital requirements. As a result, Verus Global began their search for innovative cash flow solutions to help work through these challenges and build on their business growth trajectory.

High growth, short trading history = limited cash flow funding options

While they were growing fast, Verus Global didn’t have the established trading history that many traditional financiers require. This was one of the major challenges in securing funding for their business growth.

“We were fresh on the scene and didn’t have that history behind us. Also, I was only 23 at the time, which did add to our risk profile,” said Jackson. “But we were growing so quickly and needed a decent amount of finance to capitalise on those opportunities”.

The company approached several different providers in their search for the right funding solution and found their experience with Octet stood out.

“Our account manager was very responsive. He took the time to build a relationship and understand our business. It didn’t just stop at us as their client – they got to know our clients and how they work with us too. So the Octet team was supportive of our peak seasons, when we needed extra funding, etc. There was a very positive energy from the beginning and it’s a big reason why we ended up partnering with them.”

Jackson Meyer, Group CEO, Verus Global

After deciding to partner with Octet, the Verus Global team went through a controlled and thorough onboarding process.

“Everything was checked from a compliance point of view,” said Jackson. “It ensured we were doing the right thing, while also being easy on our end”. He also reported that staff found the process of using the Octet Platform, uploading documents, and drawing down funds easy.

“Our partnership is an ongoing commitment, so we need to constantly be on top of our clients’ needs. There are times where we need to make some changes, so we’re continually working together to re-evaluate and adjust.”

Sam Ralton, Director Working Capital Solutions VIC, Octet

More than five times growth forecasted

Octet’s transport financing solution helped Verus Global shorten their cash flow cycle, build a stronger balance sheet, and increase their working capital. It also provided a valuable cash flow boost that helped them capture new opportunities.

Jackson sees Octet as a key partner in their future business growth, thanks to the flexibility and ease of their funding facility.

“We’ve recently expanded into the Netherlands, stabilised our key customers, and grown our business. After starting with $24 million turnover in our first year, we are now on track to do around $140 million this year. We absolutely see Octet as a long-standing partner to help make that happen.”

Jackson Meyer, Group CEO, Verus Global

Dynamic funding for optimal business growth

For businesses looking to expand their cash flow options to help manage business growth, having a flexible finance solution in place can help. Once the onboarding process is complete, you’ll have access to funds as and when you need them, with the flexibility to adjust as your business changes.

“Flexibility on both sides is the key. If you need something non-traditional, a partner like Octet can help in finding a solution that works for both your business and theirs.”

Jackson Meyer, Group CEO, Verus Global

“Putting in place a facility one day and not changing it again simply doesn’t work. When your business is growing and evolving, having a flexible finance solution that changes with it is crucial. You need to constantly re-evaluate limits, timing, payments – the whole lot – and work together with your finance provider to optimise the process.”

Sam Ralton, Director Working Capital Solutions VIC, Octet

Octet has the ongoing commitment and experience to work with your business to leverage your strategic business growth plan.

Unlock your transport and logistics business potential with Octet.

Powering business together. Discover more.

Funding for business growth: what you need to know

Posted on October 29, 2021May 20, 2024 by Duncan Khoury

For businesses experiencing rapid growth, this can be an exciting – yet challenging – time.

With increasing demand and growing revenue, you can see several opportunities ahead. To meet this new demand, you might consider expanding your workforce, automating processes and introducing new products or services.

But all this change requires investment.

The question then becomes how to best fund business growth to create consistent, sustainable progress. Options range from debt to equity to internal funds, but the best financing option for your business can vary according to your operations and ambitions.

Debt financing is typically the best choice for businesses that lack the internal funds to fuel growth when the owners want to retain control. And while banks are often the first place that businesses turn to for debt finance, they aren’t always the best fit.

So, depending on the nature of your business, alternative funding sources might offer more flexible and cost-effective financing – often acting as a supplementary facility to any bank arrangements.

How business loans work

Debt financing is money that you borrow and then pay back with interest over an agreed period of time. Also known as a business loan, debt financing is designed specifically for business purposes. It typically includes fixed amounts to cover one-off projects or purchases or a line of credit.

Business loans can vary in terms of rates, repayment terms, loan terms and the type of security required.

When most people think of business loans, they think of borrowing money from their bank. To secure a business loan from a bank, you’ll need to provide evidence that your business is sustainable and can service its debt.

Banks generally have a low appetite for risk (see below), so they can – and often do – need extensive assurance about the viability of your business. Each bank has its own lending and eligibility criteria, but you’ll usually need to provide:

information about your trading history
information about your credit history
financial statements, including balance sheets and profit and loss statements.

Depending on the nature of your business, you may also need to provide additional information such as a business plan, contractual agreements or cash flow projections.

It’s not surprising that banks are often the first port of call for business lending. As an existing customer of your bank, taking out a loan can seem like a natural extension of your business banking relationship. That’s probably why banks have traditionally been the primary source of funding for businesses.

But for businesses in a growth phase, borrowing from banks can be challenging.

Core challenges with business bank lending

While banks are often the go-to business funding choice, their loans generally come with added complexities, including:

Strict lending criteria

Thanks to operating in a highly regulated environment and being answerable to shareholders, banks tend to have a low appetite for risk. This generally means they take a more conservative approach to lending.

Complex paperwork

Paperwork goes hand-in-hand with strict lending criteria. Businesses often need to submit evidence from across several areas of their operations, which the bank will then assess as part of the approval process.

Long lead times

With strict criteria and complex paperwork requirements comes longer lead times. These lead times can occur not just during the application process, but also throughout the life of the facility. Some business bank transfer times can be as long as several days, resulting in delayed payments to suppliers.

High transaction costs

Bank service charges for businesses can be high, and add up over time. If your business has a high volume of transactions and you deal in exporting and/or importing, these fees can impact your profitability.

For businesses looking to grow, these challenges can have serious implications. Strict criteria and complex paperwork requirements can be difficult to meet for businesses on a fast growth trajectory or with very little stock on hand.

And even if a business meets the bank’s eligibility criteria, long lead times can cause them to miss opportunities, holding them back. Funding is a key ingredient for growth, so it’s critical for businesses to have the financing they need to support growth initiatives.

Beyond banks: other sources of finance available to a business

If you’re wondering what the best financing options for your business outside of (or in addition to) the big banks might be, consider our list of alternative debt finance options below:

Debtor finance

Debtor finance allows a business to borrow based on one of its biggest assets: its accounts receivable.

A debtor finance facility can help to bridge cash flow gaps by providing access to funds that are owed to your business when you need them. Rather than charging interest on a fixed loan amount, the finance provider instead charges a percentage of the amount owed in exchange for offering fast access to cash.

This can be a good option for businesses that don’t have the physical assets to offer as security to banks. They may have maxed out their property equity or have a business model that doesn’t require holding physical assets, such as eCommerce.

Trade finance

Trade finance is a type of funding that provides you with a convenient, revolving line of credit. Facilitated by a third party, it means you are able to pay suppliers instantly and enjoy flexible repayment terms. While it’s often used to streamline international trade, it can also help you strengthen relationships with local suppliers who may have short payment terms or require full payment upfront.

And much like with debtor finance, it doesn’t require businesses to provide physical assets as security.

Supply chain finance

Supply chain finance is a hybrid form of funding that covers both debtor and trade finance. It provides off-balance-sheet financing that helps to strengthen a company’s balance sheet while improving its cash flow management at the same time.

A supply chain finance solution links suppliers and buyers in the one process. If you’re a buyer, it enables you to settle a supplier’s invoice immediately and perhaps take advantage of early payment discounts. Then, you can repay the invoice amount at a later date, which can strengthen your supplier relationships without interfering with your ability to take out other loans.

Flexible business finance alternatives

Most companies need some form of finance to power their business growth. While banks can be a valuable source of funding for some growing businesses, alternative options often help to accelerate their growth.

At Octet, we offer a range of flexible business finance alternatives including:

Debtor finance: Get up to 85% of your invoices paid now to boost cash flow, without needing to provide personal asset security.
Trade finance: Increases your purchasing power with a competitive, convenient line of credit – with up to 60 days’ interest free and 120 day repayment terms.
Supply Chain Accelerate: Optimises your working capital with an off-balance-sheet source of funding.

If you’re ready to power your business growth, and receive more flexibility than the banks, get in touch with the team to find out how we can help.

VIC trade signage company – printing their own roadmap

Posted on May 14, 2021May 20, 2024 by Duncan Khoury

The Scenario

This Victoria-based trade signage group specialises in trade signage printing services and printing supply and equipment distribution. The group is a leading distributor of high-quality signage, printers and printing products in Australia and New Zealand, with a fast growing and energetic team.

In a period of rapid expansion, and with a forecasted annual turnover of $12.5m, the business originally approached Octet for a Debtor Finance facility. At the time, they were going through an extensive cost-cutting process to reduce outgoings and streamline their staffing and procurement processes.

The Solution

As part of a thorough assessment, Octet reviewed the creditors and debtors ledgers, and found that both were well spread.

This meant Octet could offer to fund the existing debtors ledger, along with new invoices going forward, under a flexible Debtor Finance facility of up to $1.75M spread across the group.

This facility, together with a robust Trade Finance facility of $350K, helped to create more cash flow and free up working capital. With overheads reduced, flexible lines of credit established and new access to invoiced funds, the company is set to well exceed their forecasted profit over the next financial year.

Looking to free up your working capital?

Talk to us today

QLD transport company – Clearing the road for success

Posted on April 12, 2021May 20, 2024 by Duncan Khoury

The Scenario

Established in 2004, this Brisbane-based transport company with 1,600 employees is expanding its horizons. The business now includes a range of subsidiary companies, all servicing areas of freight, transport, civil maintenance and traffic management.

A recent period of restructuring saw the need for quick access to cash flow to ensure the organisation’s growth could continue unrestricted.

As an unlisted public business in a turnaround phase, they relied on sophisticated investors to give them long-term support, together with NAB.

The Solution

Based on financial consultant advice, the company approached Octet to explore a cash flow solution. Due to the business’s established, 15-year successful trading record, Octet seized the opportunity to assist with a tailored $10m Debtor Finance facility limit and smaller $75k Trade Finance facility.

This much-needed cash injection helped the company to reduce debt and stabilised its business operations. As a result, they are now in a better position to capitalise on opportunities they would have otherwise missed out on. The Debtor Finance facility has cleared the road for growth and success, putting the company back on track to reach its targeted annual turnover.

Looking for Debtor Financing for your transport business?

Talk to us today

Analysis: How can the labour hire industry adapt to the new world of work?

Posted on December 5, 2020May 20, 2024 by Duncan Khoury

2020 has redefined the world of work.

Workforces have seen a rapid rise in remote working and flexible work arrangements. Where work-from-home hasn’t been possible, new procedures and practices have been necessary to create COVID Safe workplaces. Job security is now a key concern, with fluctuations in demand leaving no industry untouched.

Workforce planning has become more important than ever, with the labour hire industry feeling this strain more than others.

In this article, we’ll take a closer look at the challenges and financial impacts faced by the labour hire industry in 2020, and explore how the industry can prepare for the future world of work.

The labour hire industry in Australia

So, what exactly is the labour hire industry and what role does it play in our economy?

Labour hire refers to the practice of one company contracting out workers to another company. The labour hire company sources and qualifies the workers, and enters an agreement with another company to supply these workers to them for a period of time. Labour hire companies supply workers across almost every industry.

The labour hire industry has grown significantly in Australia over the past three decades. In fact, it now makes up a significant portion of the workforce in a number of industries – such as construction, hospitality, mining and manufacturing.

This widespread adoption of contract workers brings the challenge of managing employee rights, commercial considerations, and the changing demands of our economy.

A changing landscape

2020 was a particularly challenging year for the labour hire industry, as the COVID-19 pandemic swept the globe and related response measures came into place. Some industries shut down all together, some saw spikes in demand, while others experienced ongoing fluctuations as a result of changing restrictions. Add to that new virus-related OH&S considerations, and it was a year of mixed fortunes and challenges for labour hire businesses across the sector.

Here are some of the changes and their impacts:

Unexpected decline – For companies experiencing a significant decrease in worker demand, an unforeseen drop in revenue put a strain on finances and raised questions about their future viability. No matter what their prior plans had been, the focus switched to simply what they could do in order to continue operating through the pandemic, and come out the other side as strong as possible.
Rapid expansion – Conversely, some labour hire companies found themselves struggling to manage fast growing demand. Their attention turned to ramping up recruitment, sourcing new workers, and securing fast funding to capitalise on new opportunities.
New conditions – For labour hire workers in industries with continued demand, new virus-related OH&S factors came into play. While they could still work, there was now a difficult balance between wanting to stay safe, and employment that came with no job security or sick leave.

While 2020 introduced these significant changes, it’s likely their impact will continue into the future. With the pandemic still running its course and further fluctuations in demand expected, labour hire companies therefore need to continue to adapt the way they do business so as to better meet the challenges ahead.

Addressing workforce challenges

The future of the workforce and the way we work will continue to challenge the labour hire industry. There will be practices that are no longer relevant in the future and need to be let go, as well as adjustments necessary to meet the new way of doing business. Without a clear plan in place to address these new challenges, the ramifications for labour hire companies can be significant.

There are also ongoing commissions in place conducting annual investigations into the industry. The findings consistently focus on the fair treatment of workers and adherence to their rights, maintaining OH&S levels and monitoring compliance to regulations. Payment orders and penalties are in place for companies who are found to be non-compliant.

The risk for labour hire companies doesn’t end with a fine though. If sufficient OH&S measures are found lacking, company and shareholder value can come under threat and access to external capital can be made difficult. As such, a focus on managing human and labour rights with commercial considerations is imperative.

Looking ahead: the labour hire industry of the future

Now that we’re nearing the end of the year, the spotlight has turned to the future. How has 2020 changed the labour hire industry and what does this mean for labour hire providers?

Securing stability during downturns

2020 has highlighted the impact of demand fluctuations, and the importance of having strategies in place to ride them out. It is now a critical consideration to prepare for future downturns. With flexible finance solutions, such as debtor financing, in place, labour hire companies can access fast cash flow to help meet commitments until demand turns around. With cashflow playing such an important role in ongoing financial viability, flexible financing will be key to riding out future downturns.

Capturing new opportunities

For some industries, demand for workers will continue to grow for the foreseeable future. And while some labour hire businesses may find themselves in this enviable position, it doesn’t come without its challenges. Access to flexible finance is one of the biggest issues facing companies with fast-growing demand. Sourcing new labour takes time and resources that are often stretched in periods of growth. We offer a range of Labour Hire Financing Solutions that may be suitable in helping quickly source funding for growth.

New levels of compliance

As the labour hire sector continues to come under scrutiny from government regulators, so does the need for labour hire companies to mitigate their risk. Without it, the financial penalties can be significant and the reputational risk long-lasting. While commissions haven’t as yet publicly announced any of the breaches they’ve uncovered, this may change in future.

Being prepared

Changes in demand can, and do, happen – and the impacts can be substantial. With an ongoing pandemic and associated economic uncertainty, being prepared is key. Labour hire finance solutions can help you prepare for shifts in demand, free up capital to support growth, and mitigate risk.

Take a look at our flexible Labour Hire Finance Solutions and get in touch to discuss.

Octet on 6PR’s Perth Live with Oliver Peterson

Posted on October 26, 2020May 20, 2024 by Duncan Khoury

With cash flow absolutely top of mind for Aussie SMEs in the current turbulent economic conditions, it was a fantastic opportunity for our Director of Working Capital Solutions, WA, Nigel Thayer to speak with Oliver Peterson on 6PR’s Perth Live program. Listen to the full interview here.

Methods that worked well for fast-growing businesses in 2019 may not be having the same impact in the current climate, and Nigel covered some top cash flow management tips, including:
– creating a short-term cash runway
– increasing internal and external stakeholder communication
– identifying alternative sales channels; and of course
– accelerating your access to outstanding cash via intelligent working capital solutions!

Disclaimer: This article and any associated content 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.

Working Capital Solutions

Trade Finance

Debtor Finance

Supply Chain Accelerate

OctetPay

Industries

Why Octet

Digital wallet

Global network

Cross-border payments

Supply chain management

Security

Rewards

How debtor finance works

What is invoice factoring?

What is invoice discounting?

The evolution of factoring and discounting

What’s the difference between confidential and disclosed debtor financing?

How does confidential invoice discounting work?

How does disclosed invoice discounting work?

Which is best: confidential or disclosed?

The advantages of debtor finance

Is debtor finance right for you?

Is your business ready for a debtor finance solution?

Octet, the experts in debtor finance

Discover more about debtor finance

Why is a healthy balance sheet important?

Back to basics – what is a balance sheet?

What’s considered a strong balance sheet?

A positive net asset position

The right amount of key assets

More debtors than creditors

A fast-moving receivables ledger

A good debt-to-equity ratio

A strong current ratio

Why is it smart to have a healthy balance sheet?

Ways to make your balance sheet healthier

Your balance sheet and securing finance

Trade Finance

Debtor Finance

Want to know if your balance sheet is healthy?

Growth trajectory outpaced existing working capital

Business cash flow funding solutions for now and into the future

Immediate and flexible funding supports expansion

A finance facility that grows with the business

Realise your business potential and grow with Octet

Keeping up with ongoing growth since 2015

Providing solutions for continuing growth

No more saying ‘no’ to work

More spectacular growth ahead

Grow your business with Octet

A fresh option: seamless international money transfers for businesses

FX for business: OctetPay is the solution

So, what are the other benefits of choosing OctetPay?

Octet makes business easier

Power your growing business

Navigating growth in the FMCG arena

A tailored approach to funding growth

Ambitious growth projections established

Personalised service makes all the difference

Unleash your business potential with Octet

Understanding debtor days

Why do businesses monitor debtor days?

What affects debtor days?

How to accelerate payments and reduce debtor days

Collection procedures

Strengthening customer relationships

Automation solutions

Take control of your cash flow with Octet.

What are invoice finance, factoring and invoice discounting?

What’s the difference between invoice financing and factoring?

Why would a business choose invoice finance over traditional finance?

When should a business seek invoice finance?

What is the rate for invoice financing?

What are the risks of invoice finance?

So, how do I find a reputable finance provider?

Is invoice finance the answer?

A booming labour hire business with no room to grow

Immediate funding and a long-term growth solution

Impressive revenue growth in the first year