Making working capital work smarter: Broker Daily "Spotlight" podcast with Dan Verdon
Cash flow constraints don’t always signal a struggling business – sometimes they can simply stand between an SME and its next growth opportunity. Broker Daily spoke with Dan Verdon, Director Working Capital Solutions NSW, for the Spotlight podcast about how debtor finance can help businesses bridge cash flow gaps, pursue growth opportunities, and give brokers another way to support their SME clients.
Working capital is becoming increasingly important for SMEs. This week’s Spotlight explores how changing cash flow pressures are reshaping the funding needs of businesses and the opportunity for brokers to identify where flexible working capital solutions can help.
As SMEs contend with higher costs, changing payment obligations, and tougher ATO debt collection, cash flow is becoming an increasingly important part of the growth equation. Broker Daily’s Julian Barnes catches up with Octet Director Working Capital Solutions NSW, Dan Verdon, to explore how businesses are adapting and where brokers can play a role.
While a cash flow constraint does not necessarily mean a business is unprofitable or in trouble, it can prevent otherwise healthy SMEs from taking on new work, purchasing stock, hiring staff, or pursuing growth opportunities. For brokers, understanding where those gaps exist can open up new funding conversations with existing clients.
Inside the working capital shift:
- Payday Super and tougher ATO debt collection are adding new pressure to SME cash flow, particularly for businesses with large payrolls or outstanding tax obligations.
- Businesses are increasingly seeking flexible funding that can grow with them, with receivables finance and trade finance helping bridge gaps between invoicing, getting paid, and paying suppliers.
- Brokers can uncover working capital opportunities by looking more closely at existing B2B clients and identifying businesses with cash tied up in receivables or immediate supplier payment requirements.
It’s definitely a mixed market. Not all SMEs are experiencing the same conditions. Most challenges are about cash flow timing, not the viability of the business itself.
The businesses we work with are looking for flexible working capital solutions and want to continue to grow.
For the day-to-day for businesses, if they don’t have the cash flow they require, it’s hard to grow. It’s hard to continue purchasing stock, accept larger contracts, or take on more work. It might be difficult to hire more staff because they haven’t got the working capital to do that.
So what it does is hamstring businesses and stop them from growing because they haven’t got access to cash. Growth becomes constrained, and, even though they might have a lot of demand, they just can’t actually service that demand.
We’re seeing a lot of businesses that want that flexibility. They want to be able to access different finance products that can assist with cash flow.
Generally speaking, we’re seeing more prepared businesses these days. However, most want to get a fairly quick result, and they want the facility to grow with them.
More traditional funding lines would generally have a certain limit. Once you’ve capped out at that limit, you can reapply with the bank, and that might take months.
With our products, particularly receivables finance or debtor finance, the limit will always grow with the clients’ requirements. So if they have a big quarter or a busy month, we’ll be able to facilitate that growth.
All of our brokers will have different clients in different sectors and industries. Every broker will have clients experiencing cash flow issues.
The first place to start is by reviewing the businesses involved in B2B transactions. If we’re talking about receivables finance, we’re talking about businesses that have a receivables ledger, so we can add value by bridging the gap between when the business invoices and when they get paid.
So if it’s business-to-business, if there are cash flow issues, or if a client is complaining that they’ve got no cash because all their funds are tied up in their receivables, that’s a really good clue that debtor finance or trade finance might work for them.
There are lots of different elements to that. We find at Octet that we really assist a big proportion of our clients who are going through a growth phase. They want a lender to facilitate that growth, and we can do that in several different ways.
But in terms of identifying clients, it’s really about asking: is there a cash flow gap, and can we add some value? By having a chat on the phone and understanding a bit about the business, we can tell them that pretty quickly.
Receivables finance has been more of a mainstream product over the last few decades, but it’s still not like an overdraft or a mortgage, where pretty much everyone understands what the product is.
A lot of people overcomplicate debtor finance, but it really is quite simple. All we’re doing is bridging the gap between when the client invoices and when they get paid. There’s a clear cash flow gap there that we can assist with.
With trade finance, historically, it’s been known as quite an onerous, labour-intensive product. We’ve created a product where we rely on technology and make the process seamless.
We are focused on solutions. Brokers need to get an outcome, so we’re very quick to workshop a transaction and let the broker know if we can do it and what we can do. But we also let them know very quickly if we can’t do it. There’s absolutely no point dragging out a transaction. We’re very realistic about what we can and can’t do.
We really feel that every SME is different and unique in its own way. So it’s our role to really understand what the requirement is.
It’s not a one-size-fits-all product. We try to drill down, with the help of the broker and the client, to really understand exactly what they need. Then we try to present and deliver a solution.
Broker Daily - Spotlight podcast
Listen to the full podcast to find out how brokers can identify the working capital opportunities within their client books and help SMEs keep growth moving.
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Disclaimer: The above article content and comments are 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.