LANDING THE BIG FISH

Make working with big business work for your business.

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ContentsBenefits of working with big business 4

Pitfalls of working with big business 5

Safeguarding your position 6

How Apricity Invoice Finance can support the growth of your business 7

What is Apricity Invoice Finance? 8

Six things you should know about invoice financing 10

Why is invoice finance the right choice for growing SME’s? 12

We are here for growing businesses - Testimonials 14

A note about us. 16

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It’s the dream for many SME’s to land a big client, a game changing contract or piece of business. Opportunities for growth are often few, far between, and almost always include elements of risk for the smaller operator. Apricity can help guide you on harnessing the benefits and avoiding the pitfalls of landing that big fish.

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BENEFITS OF WORKING WITH BIG BUSINESS Landing a big client is an exciting milestone, and one worth celebrating. Some of the benefits to having a large client or piece of business include:

Increased revenue – bigger clients generally have bigger budgets, are better at forecasting work and looking ahead, which can mean more money in the bank for you.

Regular cashflow – typically, the contracts are longer term and mean steadier cash flow and stability for your business.

Opportunities for growth – greater certainty around revenue can mean more time to devote to growing your business.

Greater credibility – landing a large, well-known client can change perceptions of your own business as well as raise your profile in the market.

Networking opportunities – once you start working for a large business or organisation you may have the opportunity to sell to other divisions, suppliers or new contacts.

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PITFALLS OF WORKING WITH BIG BUSINESS

While there are many advantages to working with big clients, business owners also need to be aware of the risks involved in taking on large contracts;

Dependency – losing a large client can leave a huge hole in your revenue. In some cases, if a large client ends the relationship it can even lead to the insolvency of a smaller business.

Demanding and slow – larger budgets and brands mean bigger expectations. There may also be many layers of process and approval, slowing down work and eating into your time.

One sided price negotiation – if you become too reliant on a large client you may not have much bargaining power when it comes to negotiating on price, payment times or fees.

Late payments – larger clients may take a long time to pay your invoices, something that will almost certainly lead to cash flow issues for your business (particularly if you are carrying the costs of your suppliers, warehousing, wages and GST etc.).

Increased costs – if you are required to upscale your business in order to deliver to your large client e.g. extra staff, equipment, subcontractors, you may have bigger overheads and run in to cash flow problems.

More stress – meeting the needs of a potentially demanding, powerful larger client can lead to more stress for you and your business.

A WORD OF WARNING1. Too many eggs in one basketAn Australian food producer won a contract with a major grocery chain. This was a huge boon for them, they moved premises, hired more staff and purchased new equipment to ensure they could meet demand.

However, just a few short months later a new brand was taking up the space on the supermarket shelves. Our client was informed that the supermarket had found a new supplier and would no longer buy his products. Sadly, the business failed not long after.

2. Feeding the big fish at the expense of the little onesA food manufacturing business won a large contract to supply to a supermarket chain. Due to the success of the range, they were asked to develop more products based on the supermarket’s suggestions.

While in the R&D phase, the business focused solely on the needs of their golden goose. They stopped looking after their other smaller channels to market and quickly ran into crippling cash flow issues.

3. Know your contractOne of our clients won a large contract to supply machinery to a large civil project in NSW. The machinery supplied and fitted was not precisely what was specified on the contract. As they were deemed as not having met their contractual obligations, the machinery had to be removed and replaced. This cost the business over $1 million dollars and almost put them out of business. It pays to know your contract inside and out.

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SAFEGUARDING YOUR POSITION

Before celebrating the landing of the big new client, you should put in place safeguards to ensure your business is protected.

Check your margins – make sure you have done the financial due diligence upfront to ensure not only that you can deliver, but also make a profit.

Consider using trade credit insurance – to safeguard you against losses sustained if your buyer fails to pay.

Manage your cash flow - invoice finance is an ideal option for businesses scaling up to meet the demands of a larger client by giving them access to the cash from their invoices faster.

Enter a contract cautiously – many businesses don’t spend enough time understanding the contract or negotiating terms upfront. This can severely impact your business if things go wrong.

Check your capacity – ensure you are able to fulfil your obligations. Make sure you consider everything right down your supply chain. Can you access everything you need to meet the contract?

Don’t over promise – stick to what you know you can deliver on. Don’t offer to go beyond your core competencies just to win the business. It may come back to bite you.

Don’t under-price – in a tendering or pitch situation it can be tempting to price at the lower end to increase your chances. But this leaves your business and profitability at risk.

TIPS FROM OUR EXPERTSNick Chan, Head of Sales and Relationships, NZMake sure you have the capacity in place to fulfil your obligations. You may spend so long focussing on the deal and winning the contract that you may not have considered what will happen next. What is your capacity - staff, equipment, funding for development, electricity, suppliers? Have you thought about everything / spoken to your suppliers who may be impacted? Do they agree and support you?

Mornet Van der Merwe, Head of Credit

Having the right margins is key. Make sure you do the appropriate financial due diligence upfront to ensure the margins and contract terms are not only achievable, but also good for your business. Know your contract inside out, certain deliverables, liabilities, timing or cash flow constraints can cripple or severely impact your business.

Rachael Burling, Head of Sales and Relationships, NSWDon’t look for short term loans to cover shortfalls or upscale your business to work with larger, powerful clients. You must look longer term, have a real business plan in place if you plan to play with the big boys. Ensure you complete cashflow forecasts and cost projections to meet peak funding and resourcing requirements. Make sure you have a funding partner with flexibility and reliability to support your business long term.

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HOW APRICITY INVOICE FINANCE CAN SUPPORT THE GROWTH OF YOUR BUSINESS

One of the main reasons businesses use invoice finance is to assist them maintain steady cash flow during periods of growth. Rather than taking out a short-term loan and taking on more debt, an invoice finance facility gives you access to the funds from your own invoices as soon as they are approved.

Instead of servicing a debt, you may find an invoice finance facility gives you better control of your financial situation. You have the ability to smooth out your cash flow and meet your funding and resource needs. There are no monthly fees or lock in contracts so having a flexible invoice finance facility like Apricity is ‘at call’ means you use it as much or as little as you need to.

A couple of other things to note:Your size can be your advantage – one of the key benefits of being a smaller player is having a personal touch, you can be more responsive, creative and agile (often this is refreshing for a larger organisation).

Don’t be afraid to walk away – regardless of how exciting an opportunity may seem at the beginning, if the relationship is difficult at the outset or you feel that fulfilling the contract will be to the detriment of your own business, look for another big fish.

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WHAT IS APRICITY INVOICE FINANCE?

HOW IT WORKSWe finance up to 95% of approved invoices upfront. This means businesses gain access to their own funds faster; no more waiting for invoices to be paid, better cash flow management, increased production capability and better ability to take advantage of opportunities for growth.

Our business was created to help support the specific growth needs of SME’s who supply goods or services to large business, organisations or government. We offer one of the highest advances on 30-day invoices currently available in Australia and New Zealand, paying up to 95% of our customers’ invoices on approval.

There are no ongoing administration costs, lock in contacts, or security by way of personal assets required. Plus, you have the flexibility to use the facility as little or as much as required.

 

You decide if you want your invoice paid faster and upload your

invoice into our easy online portal

You supply your goods to your big business

customers and invoice them

As soon as it is approved, Apricity pays

you up to 95% of your invoice

The balance of the invoice (less

our fees) will be paid when the

invoice is settled.

You enjoy

freedom that comes from

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“Apricity Invoice Finance helps unlock your business’ potential by closing the gap between the

time you invoice your customers and when you receive payment.”

Linden Toll Chief Executive

Apricity

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SIX THINGS YOU SHOULD KNOW ABOUT INVOICE FINANCING

In the current climate, with tighter lending conditions impacting many SME’s we are seeing invoice finance increasingly becoming a ‘go to’ solution for growing businesses. However, as with any product, it’s critical to understand the pitfalls along with the benefits before deciding whether it’s the right option for you.

1. CONSIDER THE TIME VALUE OF MONEYInvoice finance allows businesses to get money back into their business faster. When looking at the cost of invoice finance, it is important to remember that a dollar today is worth more than the dollar you get tomorrow. By getting funds back faster, businesses can reinvest those funds at their gross profit margin. Compound this month on month and it’s easy to see that the funding cost of invoice finance can easily be offset by the value of faster payments.

2. NOT ALL INVOICE FINANCE IS EQUALThe terms ‘factoring’, ‘invoice discounting’ and ‘supply chain finance’ are more or less used interchangeably. However, there are some distinct differences between these models:

Selective Invoice Finance: is the term we use at Apricity; customers have the flexibility to choose which invoices to fund, when and what percentage (within prescribed limits).

Factoring: the provider often takes on the role of managing the debtor ledger and chasing payments. The provider will often want to manage the entire ledger – meaning you cannot choose which invoices you fund.

Invoice discounting: a financier will advance a percentage of the face value of an invoice, often around 80%. However, the business maintains control of chasing invoice payments.

Peer to peer (P2P): This is making lots of noise globally – not just with invoice funding, but with loans and investments of all kinds. With invoice funding via P2P, the business seeking funding can access investors directly via a technology platform. You state the terms you need, and the investor sets the interest rate.

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3. FLEXIBILITY AND TRANSPARENCY For invoice finance to be of greatest benefit to a business, it needs to be ‘at call’. They can choose when they use it and when they don’t, without incurring penalties.

The biggest criticism of the different invoice finance models are the very stringent contracts that providers place companies under. We often work with businesses to try to find ways to exit contracts that no longer suit their needs. Sadly, this often means enormous exit fees payable to the provider.

4. HELP IN TIMES OF GROWTHOften businesses experiencing rapid growth will run into trouble because they have exhausted their lines of credit, already mortgaged their house or built up an ATO debt.

This is where invoice finance can be really beneficial:ATO Debts The right invoice finance facility can also help businesses clear existing ATO debts, freeing their balance sheet to access finance for new equipment or other capital expenditure.

Exhausted lines of credit Let’s say a business wins a new contract and needs to hire more staff or buy new machinery. But with their house already on the line, overdrafts and credit cards at their limits, their options may be limited. By utilising invoice finance, the business can clear existing debts, paving the way for further finance.

No property security As the invoices themselves are usually the only security required, business owners do not need to put up homes or other personal assets as security.

5. UNDERSTAND FACILITY LIMITS Facility limits are usually set based on the value of the debtors’ ledger. However, if invoices are late or concentration limits are imposed (because the ledger becomes skewed heavily to one client or industry), most lenders will change that limit. Therefore, one day the limit is $500k and after applying late invoices and concentration limits, the business may only have access to $400K. It is vital to understand how late payments and concentration can affect the facility limit before signing any contract.

6. KNOW THE CONTRACTOften hefty account and facility fees can blow the actual cost to the business well beyond what was originally quoted. Often this is not apparent until the client is months into the contract, so it is imperative to read the fine print. Look for a clear, simple contract that allows the business to use the facility when it suits them, without financial retribution.

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A reliable invoice finance facility can have a stabilising effect on the cash flow of your business

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WHY IS INVOICE FINANCE THE RIGHT CHOICE FOR GROWING SME’S?

Our invoice finance facility is for businesses providing goods or services to high credit customers. These may include; government, major telcos, supermarkets and infrastructure businesses, hotel chains, importers/exporters and distribution companies.

A business experiencing a period of rapid growth or taking on a new opportunity faces a unique set of challenges. Often, the first step will be to seek finance, perhaps to increase staff number or purchase new stock or equipment. However, businesses must be cautious about taking on additional debt and plan for the long term.

A reliable invoice finance facility can have a stabilising effect on the cash flow of your business. Rather than being under the cloud of servicing a debt, you may find you are in better control of your financial situation and are in a position to say Yes instead of No to new opportunities. Cashflow certainty is a real enabler of future growth.

BETTER CASH FLOW

Get your money back into the business faster.

Better planning and management capabilities come with payment surety.

LESS RISK

No security usually required other than the invoices themselves.

Getting paid earlier can mean less need to take on debt.

MORE FLEXIBILITY

No ongoing fees, lock in contracts.

Use the facility as little or as much as you need to.

No concentration limits on your invoices.

SUPPORT BUSINESS GROWTH

The ability to scale up or down quickly.

The surety that your obligations can be met.

TIME/VALUE OF MONEY

A dollar back into your business sooner can be invested, creating a larger return.

APRICITY RELATIONSHIP

We are along for the ride too.

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WE ARE HERE FOR GROWING BUSINESSES

One of the most rewarding parts of our business is the knowledge that we are making a real difference to the lives of our clients.

CLIENT STORY (BULK HAULAGE)We are a bulk haulage business based in New Zealand. Primarily we transport aggregate and fill for two large infrastructure companies throughout the North Island, we also have a few smaller corporate clients.

Generally, the main issues that arose for our business were due to scheduling. We have clients that are very last minute with their needs, while others are more organised – this means we run into cash flow issues when we need to pay our drivers or fuel suppliers but are waiting on the payment of our own invoices. We also had some opportunities on the table to grow our business, but we were unable to act on them due to cash flow instability (as well as not wanting to get into further debt).

At the time invoice financing was a relatively new product to New Zealand but we could see straight away it was a great option to unlock the finance from our invoices, improve cash flow and create some working capital for expansion.

Key successSince we began working with Apricity our revenue has doubled, we have been able to take advantage of larger opportunities without having to worry about how we would pay for the additional costs, in particular employees and equipment. Invoice finance gives us flexibility and quick turnarounds as well as having no requirement for extra security (as asked for by our bank).

“ We have a great relationship with both Apricity’s Head Office in Australia and the office here, working with them is a smooth process - really a piece of cake”

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CLIENT STORY (ENGINEERING)Our business was formed two years ago and operates out of Mackay, Queensland. The business specialises in project management, labour hire, engineering as well as commissioning/close out of major projects for clients in the mining and heavy industry sectors.

As a small supplier to some very large players we quickly found ourselves in the backbreaking position of having a labour force in place for a project, but then waiting anywhere between forty-five days to two and a half months for our invoices to be paid.

As self-starters with years of experience in project management and labour hire, we were well aware that maintaining cash flow would be key to our success.

A review of funding options was undertaken, looking at the offerings of our Banks as well as other debtor finance companies. Quite honestly, we were put off by the extensive fees charged, the limits and rigidity of the options available, as well as needing to make an ongoing commitment to one supplier. We chose Apricity Finance for the simple fact that they offer one flexible product that we can use as and when we need to.

Key successSince we began our relationship with Apricty, we have been working in a much more stable business environment. We currently have our largest ever workforce (90 people) employed and can feel confident that they will all be paid on time, which is paramount to a business like ours.

“ Thanks to Apricity, we are in the exciting position of being able to take on bigger contracts and diversify our offering.”

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A NOTE ABOUT US.

Founded by a team of experienced investment management and finance professionals, our first office opened in New South Wales’ Southern Highlands in 2013. We now have offices around Australia and in New Zealand

We understand the challenges of running a business and as such, we offer a flexible solution to help businesses not only meet their financial obligations but also plan for growth.

Our funding capital is accessed from a range of sources; global and domestic institutional funds, as well as private high-net-worth investors. This range of investors provides diversity and surety and means that our model is not influenced by one large funder.

We are a boutique amongst giants and offer a personalised approach which is rare in this industry. Great relationships are at the core of our business, Our clients are safe in the knowledge that they have access to the decision makers at any time and that their needs are first.

Contact Apricity today to find out how an invoice finance facility can help your business succeed and grow.

RESOURCES Making the most of tendering opportunitieshttps://www.apricityfinance.com/making-the-most-of-tendering-opportunities/

Australian Tendershttps://www.australiantenders.com.au/

Government Support – National Payments Register http://www.treasury.gov.au/sites/default/files/2019-03/Government_Response_-_Payment_Times.pdf

Does your business need trade credit insurance?https://www.thebalancesmb.com/trade-credit-insurance-4174271

Working with Government https://sellingtogov.finance.gov.au/guide/getting-selected-to-supply-to-government

https://procurepoint.nsw.gov.au/before-you-supply/supply2gov

Business supporthttps://www.business.gov.au/

apricityfinance.com email: admin@apricityfinance.com PH AUS: 1300 277 424 PH NZ: 0800 277 424