This long-established food and beverage company manufactures soft drinks and other beverages for customers across Australia.
The business had finance with an existing traditional financier; however, due to having few major debtors, they could no longer meet the facility’s concentration limit requirements. Their primary financial institution suggested that they refinance.
The Solution
The company approached Octet to ask about a solution that would meet their needs and provide working capital fast.
Octet approved a $1.5 million Debtor Finance and $75,000 Trade Finance solution for the client. This decision was based on the company’s good quality debtors, lack of bad credit, and solid processes. While the company had experienced difficult trading conditions over the past 12 months, they’d implemented strategies that would comprehensively address these issues.
This fast working capital funding will enable the business to bring their creditor accounts back in line with agreed trading terms. Going forward, they’ll then have the funding to continue as a far more profitable business.
Manufacturing – taking materials or components and turning them into something new, often on a large scale – is essential in our modern lives. And it’s not just necessary for consumers, but also for the state of Australia’s economy.
The Australian manufacturing industry employs over 923,000 people, which is over 7% of the country’s total workforce. Collectively, the 47,530 businesses that make up the sector earn over $32b in profit. But no matter the size of an operation or how successful it may be, strong cash flow is always an essential part of maintaining that success.
Learning how to improve cash flow in a manufacturing business can be the difference between a struggling operation and one that thrives. And cash flow has never been more vital than in 2020. After all, you need to buy the raw materials before you can manufacture anything for sale.
So let’s take a look at the four most common cash flow issues and our 10 tips to improve cash flow in your manufacturing business.
Common manufacturing industry cash flow challenges
While many factors can put your working capital under pressure, the following circumstances are four of the most common.
Business cycle length. There’s no getting around it: the time from buying your raw materials to selling your goods and receiving the money can last weeks to months. And meanwhile, any working capital you’ve invested in those raw materials is completely tied up. Yet you still need to purchase more raw materials or components to keep the manufacturing production line moving. It doesn’t matter whether your payment terms are cash on delivery (COD), 30 day end-of-month (EOM) or 60 day EOM. You’ll still need to pay for those goods well before you start receiving any money for your own sales. And to make it more complicated, you’re probably dealing with different suppliers that each have their own payment terms. Finally, once you’ve sold your product, you may need to wait 30, 60 or even 90 days before you get the cash. The resulting lack of available working capital quickly impacts your cash flow if you don’t take action.
Excess costs. Buying raw materials or components isn’t the only thing that can affect your cash flow. Other large costs like energy bills, wages or loan repayments eat into any available working capital. This can lead to having to juggle your bill payments and outgoings, or holding off on paying suppliers or employees. In the long term, this can damage your reputation and your relationship with suppliers and other key stakeholders.
Credit term squeeze. International payment terms were tightening even before the pandemic hit, with credit insurance limits constricting many suppliers’ terms of credit. This squeeze may lead to those suppliers demanding payment faster, putting greater strain on your cash flow. At the same time, your client base may also be feeling the financial pressure. They might then push you to accept delayed payments or even payment plans, depending on their own financial status. Both of these circumstances can result in less available cash in your business and more financial stress.
Current business climate. The general uncertainty of current economic and social conditions has created severe cash flow strains for many businesses. They may be feeling the squeeze from either their supplier, their client, or both. Depending on your client base, buying patterns may have changed significantly. For example, you might be seeing increased demand if you manufacture ‘essential’ items, or a decline in demand for non-essential products. You may also experience difficulties with your suppliers, particularly if you import materials. Overseas supply chains can be difficult to navigate during times of crisis. Even domestic suppliers may feel the effects, which can in turn impact your production line.
10 tips to improve the cash flow in your manufacturing business
The good news is that no matter the reason/s for your tight cash flow circumstances, there are ways to take control.
1. Track your cash flow. The first step is tracking your current cash flow. You can’t improve something if you don’t know its status. Where is your cash going? Take a typical product you sell – calculate the time from when you purchase the raw materials, to when you finish the product, to when a customer orders, to the point you receive their payment.
2. Review your expenses. Examine all of your expenses and cut (or minimise) anything that doesn’t directly affect production or sales – for example, branded vehicles or large showrooms. Focus instead on the expenses that directly contribute to your revenue.
3. Reduce waste. Both material waste and inefficient processes can drain your cash. Examine your processes to see if you can eliminate any inefficiencies. Can you tweak the process to save excess material waste or time?
4. Renegotiate with suppliers. This can be particularly effective if you have a strong relationship with them. You may be able to negotiate longer credit terms, lower minimum quantities, or price breaks to give yourself some breathing room.
5. Require a payment schedule. You may be able to ask for either an upfront deposit or progress payments on your goods for some clients and contracts. This reduces your risk and keeps you from footing the bill for the full manufacturing cost upfront.
6. Offer discounts for early payments. You may also have the option to offer your clients discounts for early payments. Having quicker access to your money may be worth the small loss in income.
7. Accept multiple forms of payment. The more ways people can pay you, the easier it will be to get your money quickly. That’s why Octet has recently partnered with AccountsPay for our clients – it means their customers get a range of convenient payment options for their bills.
8. Be proactive with late payers. Just invoicing your clients isn’t enough. You need to keep on top of your invoicing, and quickly follow up with late payers. Remember: the sooner you follow up, the quicker you can get your money. Depending on your clients’ circumstances, you may also need to renegotiate terms with them or implement penalties for late payment.
9. Consider a Debtor Finance solution. Our Debtor Finance solution lets you leverage your unpaid invoices to get the revenue from your sales faster. You can use it to access up to 85% of your accounts receivable value within 24 hours. And as your business grows, so too does your available cash flow.
10. Research Trade Finance solutions. Our Trade Finance solution gives you a convenient line of credit for your business. It introduces a third-party financier into your transaction so you can both pay your suppliers immediately, and get quicker payment from your buyers. Put simply, it lets you trade on your terms.
Power to trade
Strong cash flow puts you in a better position to negotiate favourable deals with suppliers, jump on any opportunities that arise, and weather financial storms.
Talk to us to discover more about improving the cash flow of your manufacturing business.
This family-owned food and beverage company, established in 1954, manufactures food items for both the Australian and overseas markets.
The business had an existing bank finance facility in place, however they needed an additional funding line that could pay specific suppliers on accelerated, industry-standard terms. They were keen to explore flexible and tailored finance options for the food industry they are so successful in.
The Solution
The company approached Octet to discuss a solution that would meet their evolving needs.
Octet initially approved a $2.5 million Supply Chain Accelerate solution, based on the business’s long trading history and financial performance.
This working capital solution increased the company’s cash flow enough to pay their suppliers on preferred terms, while also enjoying Octet’s extended repayment terms. Given the success of the initial implementation of the $2.5 million facility, the client has since raised their Octet facility to $4 million to enable increased purchasing of ingredients and engagement with additional suppliers in their supply chain. Octet’s Supply Chain Accelerate solution has eased the company’s cash flow pressures and decreased their risk of supply price increases and production delays. They are now well placed to weather any future industry disruptions.
As part of Octet’s ongoing commitment to improving the functionality and experience offered to members via our market-leading supply chain platform, we’re proud to introduce our latest innovation…
Octet’s new trading partners functionality essentially gives you the power to manage all your trading relationships from one location. Specifically, it:
Enables you to send and manage invitations to the Octet platform, thereby self-managing your trading relationships
Allows you to start trading and transacting far quicker than was previously possible
Uses a new design framework which allows you to effortlessly search, filter and sort your partners
If you are interested in further details about either of these exciting features, please speak with your Client Relationship Manager or simply email support@octet.com
A strong cash flow is one of the most important factors in making your company successful, but that can create a serious challenge in some trade relationships.
Traditional finance methods for managing cash flow are often too expensive or inflexible for many businesses. Supply chain finance is an alternative finance method that provides short-term funding to improve your working capital.
This financing method protects the supply chains of medium-to-large Australian business by introducing a third party into the buyer-supplier relationship.
Let’s look in-depth at how supply chain finance works.
What is supply chain finance?
It’s an unfortunate reality of business that each party in a trade relationship often has conflicting goals. They’re each concerned with their own business’s cash flow however, which means the supplier wants their money quickly, while the buyer generally wants to postpone payment for as long as possible.
Introduce a complex supply chain like manufacturing or retail into the mix, where suppliers are also buyers, and the potential problems multiply.
Supply chain finance is a smart financing option that offers buyers and suppliers an opportunity to work together to stabilise both parties cash flows. It introduces a financial intermediary – a third party – into the buyer-supplier relationship.
Think of supply chain finance as an innovative hybrid of trade finance and debtor finance. The third-party financier almost immediately advances the money that the buyer owes to the supplier, ensuring that the supplier receives payment as soon as possible. They later recover that money from the buyer, allowing the business to benefit from longer payment terms.
As a result, the financier effectively stabilises the entire supply chain.
But how exactly does supply chain finance work?
How the supply chain finance process works
The supply chain finance process is simple. It starts when the buyer enters into a supply chain finance agreement with a third-party financier. After this:
The supplier invoices the buyer as normal
The buyer approves the invoice as correct
The supply chain financier pays the supplier soon after it’s approved
The buyer then pays the financier up to 120 days later, as agreed by both parties
This means that the supplier doesn’t have to wait for the full payment term before they get their money. And that, in turn, means they can pay their own suppliers on time.
In short, the whole supply chain runs without cash flow bottlenecks.
Supply chain relationships are often uneven in terms of the power each party has in the transaction.
For example, larger buyers (such as big supermarket chains) can put smaller suppliers at risk of cash flow shortages by dictating longer payment terms. Meanwhile, small buyers may struggle with liquidity, and risk letting unpaid invoices fall overdue, which can then impact the entire supply chain – small, medium and large businesses alike.
Complex supply chains and global trading relationships can exacerbate the problems. Time delays with cross-border transactions or late payments can have a domino effect across the whole supply chain.
Supply chain finance can strengthen the entire chain for both buyers and suppliers.
How does supply chain finance help buyers?
Generally, the buyer is responsible for establishing supply chain finance. So why would they want to do that?
As a buyer, paying upfront for high-value goods or services can be a big hit to your cash flow. Using supply chain finance helps you to:
save money by taking advantage of any early payment discounts
still trade as usual with the cash you have available
maintain a better relationship with your supplier, which strengthens the stability of your supply chain.
Additionally, a supply chain finance facility is also generally considered an ‘off-balance sheet’ source of funding, which means it doesn’t generally affect your ability to access other traditional funding sources, such as bank loans.
How does supply chain finance help suppliers?
As a supplier, using a supply chain finance facility means you:
get paid earlier
improve your balance sheet by lowering your accounts receivables
can piggyback on a larger buyer’s credit rating, taking advantage of the favourable terms they’ve negotiated.
Put simply, supply chain finance has advantages for both suppliers and buyers, and reduces risk along the whole chain.
Octet’s Supply Chain Accelerate: a revolutionary working capital solution
We’ve designed our Supply Chain Accelerate solution to provide buyers with supply chain financing that they can then use with specific sellers.
Is Supply Chain Accelerate right for you?
Ideal buyer businesses are highly profitable with a larger turnover. To show this, you’ll need to provide a copy of your recent, audited financials, which we’ll check against our internal credit rating.
If you’re approved, here are just a few ways Supply Chain Accelerate can give your business a boost.
Quick setup
We have a fast setup process for both buyers and sellers. From the initial assessment to underwriting and on-boarding to go live, it typically only takes a few weeks.
Unsecured funding
Unlike more traditional financing, Supply Chain Accelerate is completely unsecured. That means we don’t require director or company guarantees. Instead, you secure all finance against your business performance.
Flexible finance
Supply Chain Accelerate doesn’t have to be your only finance source. Use it to supplement other existing or planned funding facilities. If you need extra finance to top-up on an existing loan, you can do that. And since we take on the liability to your supplier, it doesn’t sit on your balance sheet, so it won’t interfere with applying for other finance.
Global security
We vet both you and your suppliers against global banking standards. We also carry out all transactions securely, keeping your data safe and using anti-fraud technology. This level of security gives you extra peace-of-mind in your supply chain.
Increased visibility
Our secure platform enables you to track each critical step in the supply chain process – from procurement to payment, and from order to cash. The platform also stores and validates all essential documents at each stage, giving both buyer and supplier full transactional visibility.
Cost splitting
You can choose to pay the Supply Chain Accelerate cost yourself, have the other party pay it, or split it between both businesses.
How Octet’s Supply Chain Accelerate can grow your business
Supply Chain Accelerate recently helped a domestic fashion clothes supplier that had an outstanding ledger of $5 million. The company had one main buyer and a good credit rating, but cash flow bottlenecks were stopping them from growing their business.
A competitor had offered this client debtor finance of up to $2.5 million with an 80% advance rate. However, since the company was a good credit risk, Octet offered them the full $5 million finance at 100%.
We on-boarded their main buyer, and as soon as they were authorised, we funded the business 100% of the claimed amount, minus our transaction fee. The buyer then had 90 days to repay us, effectively giving them an extension of credit.
And since our funding was more than double the amount of our competitor’s, our client had the cash flow to effectively double their revenue within the next 12 months. As a result, their net profit after establishing the supply chain finance facility significantly increased.
Negotiate smarter
Supply chain finance can help you to improve your cash flow, strengthen your supply chain and power your business growth. But we also have a range of other finance solutions that may suit your needs.
The comments and views in this communication are those of the author as at the date of this post and are subject to change without notice. This communication should not be construed as advice and you should act using your own information and judgment. Whilst information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed.
Family owned and operated, this VIC-based health and beauty products bulk wholesale group was established in 2014. The business predominantly sells to overseas markets, throughout China and South-East Asia markets via online retailers and marketplaces, but also sells in local markets. Originally having a substantial Debtor Finance facility in place with a major bank, the businesses strong international growth meant that the majority of their debtors were now overseas, and therefore unable to be financed via the existing arrangement.
The Solution
The company’s financial adviser identified Octet’s market-leading Trade Finance facility as a perfect fit for their client’s unique requirements. As the steadily growing business had invested significant funds into itself over time, Octet were flexible enough to assign value to this equity (retained earnings and shareholder loans) – providing them with a very healthy Trade Finance facility of $A3M as their core working capital funding line – a level of flexibility that the incumbent bank was simply unable to match.
The additional working capital capacity will be primarily used to fund local procurement requirements, and with the business having a high level of seasonality, the next steps will likely be to extend the facility by approximately $A2M to help support the peak May-October 2020 sales period. Both business and adviser were extremely impressed by Octet’s speed to market and flexibility, and genuinely excited about growing the partnership into the future.
It’s no secret that retail businesses are subject to one of the most fickle customer bases. Unstable sales conditions can put huge financial pressure on owners and the teams they employ. Having adequate cashflow allows businesses greater resilience in the face of challenges. In addition, the right finances and support can arm ambitious retailers with the means to capitalise and flourish.
Coasting the ebbs and flows
Octet’s recent discussion with Australian retail veterans and trailblazers, Wittner Shoes, helped shed light on the value that finance solutions can bring to businesses in their sector.
According to CEO Michael Wittner, “All businesses go through good times and bad. And over a hundred years, we’ve certainly had peak periods of growth and then periods of decline. So, by having a product like Octet, you can future-proof your business during those down times.”
A major hurdle in retail arises in managing cycles of inventory, occurring in the space between purchasing or producing a product and selling this stock on.
Whatever the size of the business, this process can be even more stressful in the unavoidable slow or irregular sales periods. To add one more layer of pressure, even if you see drops in sales, certain financial responsibilities never cease, such as meeting staff payments.
By contrast, in order to maximise on potential trade booms, businesses may need the capital to increase their inventory and sales capacity. Seasonal spikes in the calendar, like Christmas or Valentines, can be what keeps a retail business going. However, if you don’t have the cashflow to keep up with customers, then you’re liable to miss out on important growth opportunities.
This truth of the retail trade is a recurring factor of business for Michael Wittner, “Obviously in a fashion business like ours, we have massive peaks at the start of the season when we’re bringing in new ranges, so having a product like Octet can be terrific in terms of managing those peaks.”
It’s also worth considering factors that may affect business beyond consumer behaviour. For example, if you’re receiving goods from China, there are dates to watch in order to avoid a supply vs. demand obstacle. With the Lunar New Year falling in February, many businesses in China effectively shut up shop for several weeks. Australian businesses need to think ahead to stock-up in advance of this period, necessitating extra funding.
Room to grow
Whether you’re expanding into a franchise at home or taking your business global, getting a foothold in new territories requires capital. Having financial room to breathe during key growth phases relieves stress and allows management to think clearly, pace itself and make well-reasoned decisions. This is an powerful position to be in when your business is upping the ante – and the stakes.
Outside of finance, when entering new markets, Octet can help your business liaise with new suppliers and partners. With offices in Shanghai and Hong Kong, we have experts, fluent in a broad range of languages at your disposal. This support can bridge the language barrier and smooth the process of onboarding parties to new systems such as the Octet platform, which streamlines payments for both buyer and seller. This was a feature of particular appeal for Wittner in entering the new partnership:
“One of the things I was surprised about, was how easy it was to actually set up the Octet platform. Not only here in Australia, but surprisingly, in China, in our factories. The fact that Octet has offices in multiple countries was of enormous value. I’m excited about the opportunity for us to reach new markets and distribute and expose the Wittner product to new customers.”
Keeping options open
Octet can offer support to fit your needs and objectives, bringing flexible finance solutions to retail businesses of varying shapes, sizes and scales. For larger or more established operations with the option of receiving backing from banks (such as Wittner Australia), Octet facilities can be utilised to supplement, without interfering with terms from other financiers.
Beyond bank loans, Octet finance facilities can be combined with sources of funding as wide ranging as credit cards all through the convenience of the Octet platform. Your supplier will then receive one consolidated payment from Octet, streamlining the process.
According to Michael Wittner, their relationship with Octet has helped them improve their other business relationships. He shares, “Our suppliers have really taken to it. They love Octet because they get paid the day the shoes leave the factory, and we love it because it provides us with some extra cashflow.”
Finance facilities and seamless payments can furnish you with more cards to play when entering the negotiation room. When approaching suppliers in the interest of reaching a better deal, having access to ample funding can allow you to bargain for early-settlement discounts. This approach can in turn save your business significantly over the long-term, allowing you to economise through a win-win situation.
The needs of every retail business are different. With ongoing guidance from Octet’s expert team, you can be sure that you’re getting the most from your finances. Talk to Octet about our flexible options, to access funding that makes sense to your business, your market and your objectives for the future.
Family owned and operated, this furniture transport business was established in 1992. These specialists service a long-established network of various retailers with the transportation, distribution and temporary warehousing of furniture. After experiencing trading difficulties 4-5 years ago, the business has traded successfully through a Deed of Company Arrangement (DOCA) since 2015.
The business was requiring a larger working capital facility to enable the final payment to creditors under the DOCA, allowing the arrangement to be finalised.
The Solution
The company’s external accountant, a long standing advocate of debtor finance, approached Octet about a facility that would provide the additional working capital required to successfully complete the DOCA. The business required a larger working capital facility than their current bank overdraft secured by the director’s residential property. This would stabilise the business and enable sustained growth in the medium term.
Octet was able to approve a competitively priced $800K debtor finance facility, with a 85% advance rate to meet the business’ growth needs. More importantly, the business was provided with additional cash tied up in the current debtors to payout all outstanding creditors, required for the DOCA to be finalised. Octet had a surplus of funds available for the business, which immediately placed them in a stronger cash position. The business is now in a prime position to fund existing and future growth opportunities, while reducing their financial risk by keeping the personal property portfolio separate from the business funding.
Established in 2006, this company is the largest custom moulder in South Australia, offering a full suite of services from concept development, product design, prototyping, mould making and product manufacture to a diverse range of clients.
The company sought a facility to diversify and add to their existing funding lines, to compliment business growth, without impacting their existing finance facilities and security provided.
The Solution
Revenues in the business contine to grow solidly, meaning a greater emphasis was placed on trading terms to ensure the business could continue to expand, without any impact on meeting payments according to the agreed terms with its key suppliers. For this reason, the client’s finance introducer, a longstanding Octet partner, sought a trade finance facility to support the company’s growth ambitions whilst ensuring suppliers were paid on time.
Octet was able to provide the company with a $2m trade finance facility, following a unique structure that allows Octet to rank second with a general security deed behind other existing lenders to the group. This meant that the finance received from Octet would provide additional funding to pay suppliers with terms of repayment up to 120 days. Importantly, the facility would not disturb the company’s existing credit lines and security, which was a key requirement.
This high performance national distribution company is one of Octet’s earliest debtor finance clients. Unlike traditional distribution models, the company doesn’t double or triple handle, avoiding the need to stack, unstack and restack pallets. Instead, they pick up in bulk and distribute goods to their state-based experts for final delivery. This network utilises the best service providers in each state, using their coverage and local knowledge whilst the company oversee the entire distribution process to ensure a seamless delivery from end to end. Their process allows them to reduce costs, handling, risk of error and damage.
The business sought increased working capital in their business that would not only assist in funding expansion opportunities but also provide leverage in negotiating with both customers and suppliers.
The Solution
Octet, implemented a $3m debtor finance facility that provides the business with a sound cash working capital base that the business could draw as a line of credit facility. In addition, Octet added a $700k Trade Finance facility that the business could use to pay suppliers including service based supply and subcontractors with repayment terms to Octet of up to 120 Days.
The new facility gives the directors the flexibility to push for better deals and terms from their key suppliers, allowing them to build upon their already solid business.
This specialist offering labour hire to the engineering and trades sector has been operating in Perth for over 10 years. The business had a $1.25M debtor finance facility in place with their bank, however, given recent growth and a pipeline of opportunities, they sought to increase their debtor finance facility line to $2M.
The director also had his private banking from the same bank with multiple investment properties. When the business sought to increase their debtor finance line, the bank in question advised that in order to do so the director would need to undertake new valuations on all his properties. This would take considerable time and cost. Uncertainty in the property sector in recent years also made this an unfavorable path to take.
The Solution
The managing director of the business approached their finance broker, who referred them to Octet Finance, knowing we had handled many refinances of a similar nature.
Octet was able to approve a competitively priced $2M Debtor Finance line, meeting the business growth needs. During Octet’s assessment, the clients advance rate on invoices was also increased from 80% to 85%. This meant not only was the client receiving a larger facility limit, but would also receive a greater level of funding over what they were receiving from the bank each week.
Upon settlement refinance of the banks exposure, Octet had a surplus of funds available for the business, which placed them in a stronger cash position from Day 1. The business is now in a prime position to fund existing and future growth opportunities, while keeping the personal property portfolio separate from the business funding. A great outcome for the business owner in diversifying their loan portfolio, having obtained additional funding at competitive rates while securing the business’ future.
The business is a one stop fire protection shop, stocking a wide range of fire sprinkler materials such as pipe, fittings, valves and other accessories.
The company has access to a wide variety of manufacturers to ensure they can provide the best quality products at the most competitive prices with an unmatched service. Although the company has only been in existence since 2014, the people behind the operation have been in the industry for over 20 years.
Receiving funding from a major bank was becoming increasingly difficult. Meanwhile, maintaining strong cash-flow in order to meet their many commitments remained essential. In addition, flexibility in their financing was important in order for them to seize upon growth opportunities as a young company.
The Solution
Engaging with Octet proved to be a breath of fresh air for the directors and their admin staff. The business was promptly provided with a $1M Debtor Finance facility combined with a $400K Trade Finance line which has enhanced their business working capital position significantly.
This is an important development for the company, as they have begun to source products from Asia after a lengthy research and development initiative. These products are keenly sought after by three of the company’s clients. Their combined finance solution allows them to close their supply chain loop, using a trade facility to purchase products from abroad and debtor finance to ensure healthy cash-flow for their general operations.
Located in Tasmania, this business supplies a variety of animal feeds and pet products across Australia and New Zealand to many specialised retail outlets and local supermarkets.
Their range of animal feeds are all manufactured in Australia, using local ingredients wherever possible, always of the finest quality. The stock feeds are a staple of many farms in Tasmania and indeed the rest of Australia. They also sell a range of seeds and grains for various birds and rodents. Manufacturing for a host of sub-brands, the company is also the exclusive Australian supplier of many well-known products.
The business was being financed through a bank as a single source of funding, making their situation volatile while reducing their flexibility and long-term growth potential.
The Solution
The business directors were introduced to Octet through their finance broker as a strategy of funding syndication and spreading the company’s cashflow avenues.
The company was provided with a $1.6m trade finance line through Octet’s Business Transaction Facility. The facility was able to be structured with a 2nd ranked security position, ensuring the companies existing bank facilities and relationship remain unaffected, which was a key criteria of implementation.
Octet’s $1.6m trade finance solution will assist with paying key overseas suppliers with competitive FX whilst allowing the company up to 120 day repayment terms. The company is now well positioned to take advantage of significant revenue growth opportunities in a well-established sector of the Australian economy.
JasonL has been providing full service office fit-outs since 2009, with showrooms in Sydney and Melbourne. As a young, ambitious business, the directors needed growth capital that would increase their buying power.
In addition, dealing with suppliers overseas meant that they needed to streamline their international transaction capability, looking to improve foreign exchange rates.
The Solution
In 2011, Octet partnered with JasonL to offer the business an unsecured Trade Finance facility. This solution meant that JasonL’s directors wouldn’t need to tie assets to their facility. It has helped support the business’ 30% growth rate year on year, with flexibility that allows their funding to grow along with them.
The Trade Finance arrangement with Octet ensures JasonL’s suppliers are paid promptly, which in turn unlocks early settlement discounts and enables early shipment of goods. The faster arrival goods upon order means JasonL can start an office fit out within a shorter turnaround time. Meanwhile, the business can make the most of 120 days’ credit to place more and larger orders, chase new deals and fund growth. This creates a win-win situation where the needs and expectations of all parties are exceeded.
Whilst initially Octet’s financial backing was the key driver behind the partnership, over time the relationship has deepened to include support of their entire supply chain.
Using Octet’s digital wallet to manage international payments makes the process much more efficient, transparent and secure. Transactions are able to take place far quicker through the platform and, when combined with Octet’s customer support, the directors report an improvement to their timeline of four weeks as a minimum. All this has fostered closer relationships between the business and their suppliers, as well as improved customer relations with faster turnarounds enabled for JasonL services.
Additional benefits of partnering with Octet include highly competitive foreign exchange rates, the ability to pay with credit cards to earn valuable points and access to Qantas Business Rewards opportunities through transactions made using the digital platform.
All in all, the partnership continues to be of greater and greater value to JasonL over time, allowing them to maintain their impressive growth trajectory and strengthen their business relationships.
“We want to have showrooms in each major city and be the go-to office furniture supplier. Octet is a partner for the journey of our business life. It’s definitely an ace up our sleeve, whenever we need it. As the business grows I have no doubt we’ll have Octet there.” – Marc Levin, Co-founder and CFO
Octet welcomes the Federal Government’s recent announcement of plans to create a loan program of $2 billion to support Australian SMEs, called the Australian Business Securitisation Fund. At its core, this unprecedented investment will entail the purchase of loan packages from smaller banks and non-bank lenders that will furnish them with more capital to on-lend to relevant businesses.
“This is a positive move that aligns with our long-standing vision of seeing more quality Australian businesses grow and prosper,” said Octet Chief Commercial Officer Brett Isenberg, “This funding gives proven lenders more inventory to help SMEs, increasing their access to cash flow and giving businesses more options in the lending market.”
Since the global financial crisis, with the implementation of measures like Basel II/III and APS120, banks are required to hold increasingly more capital in proportion to their SME loan exposure. As a result, they are less able to readily offer loans to smaller businesses, despite their ability to repay and their overall potential. This is forcing even strong businesses that were historically “bank quality” to look elsewhere for funding.
According to Isenberg, this program is encouraging for two reasons:
It highlights the government’s recognition that adqueate SME funding is critical to the growth of our economy and, moving forward, more funding to this sector will come by way of non-bank players, illustrating how important they are for the sustainability of the SME market.
The fund appears to be a rated program, meaning the quality of debt originated is critical, encouraging better quality lending practises.
Lenders with a proven track record, such as Octet, can now better satisfy the demand for the necessary finances to see more businesses grow.
Whilst the move seems like a promising one for smaller lenders, SMEs and the economy, we will have to wait and see what the actual effects of the Australian Business Securitisation Fund are.
Octet looks forward to working with the government and other financiers to inject power into the Australian business landscape.
Since 2009, JasonL has been “your furniture mate”, delivering full-service office furniture fit outs and growing to become an industry leader. Australian owned and operated, JasonL has long been an Octet partner, helping them to continually achieve their business goals and keep looking forward. We met with co-founder, owner and CFO, Marc Levin to hear about how Octet has played a role in their success.
Starting out
“Our business has been growing 30%, year on year. And Octet has been fundamental to our growth.”
Marc and his brother Jason started their business together nine years ago importing and distributing their own office furniture for small and medium-sized businesses.
When they partnered with Octet in 2011, JasonL was still a relatively young business. They sought a finance solution from Octet for a number of reasons – first and foremost it was for working capital.
An unsecured trade finance facility provided their business with the growth capital that allowed them to increase buying power and step up their game.
Growing, growing, gone
“Initially we partnered with Octet because of finance. But it’s become so much more than that.”
Beyond the finance itself, JasonL has found the platform highly useful in terms of their supplier relationships. Octet has enabled relationships with their suppliers to become closer and more responsive. It’s made their processes more efficient and transparent, giving JasonL control over all the paperwork floating going back and forth, streamlining their accounting function.
Meanwhile, they have more options for how to make final payments to suppliers. This added flexibility in the cash flow process, allowing them to juggle their economy as a small business, has been hugely beneficial for them. One of their funding sources are their credit cards, which they can use on payments even overseas, a new feature of the platform that has allowed them to earn valuable points and spend them when needed.
“Octet’s support has really powered JasonL to carry on growing and pushing the envelope.”
The support of the Octet team has allowed JasonL to harness the full power of the platform and finances. A prime example of this can be seen in onboarding suppliers with the digital platform, following Octet’s specialist, local staff explaining the function and benefits of the system to JasonL’s suppliers across Asia.
Throuh Octet’s support, the business has shaved down their timelines dramatically. According to Marc, with the combined power of Octet’s inhouse support team and the digital wallet, their supply and transaction timeline has been made more efficient by at least four weeks. This is an asset not only to their business, but also their customers, who don’t have to wait as long on stock to come in for their office fit out.
“Partnering with Octet has been vital up until now and as we pursue further growth, it’s definitely an ace up our sleeve.”
The history of JasonL and Octet’s relationship paints a picture of what’s to come. Marc shares that the longer their business has been with Octet, the better their understanding, the more they’ve gotten out of it and the more the partnership has grown – a positive knock on effect.
JasonL aspires to become a national player in our industry, with showrooms in every major city. Based on the success that Octet has already witnessed JasonL achieve, we look forward to being part of seeing these future goals become a reality.
“When anyone is thinking of fitting out their offices – JasonL will be the go-to.”