invoice finance Archives

How to improve cash flow in your business

Posted on July 12, 2024September 4, 2024 by Duncan Khoury

Maintaining a healthy cash flow in an unpredictable economic climate is crucial for business resilience. Doing so ensures your business can meet its financial obligations and seize growth opportunities, but improving cash flow in business can be a challenge in many industries.

In this article, we provide practical information on business finance to improve your cash flow, helping your company not only survive but thrive in these more difficult economic conditions.

How to control cash flow in business

Cash flow is the lifeblood of any business, representing the movement of money in and out of the company.

Sam Ralton, Octet’s Director of Working Capital Solutions, VIC, TAS, SA, explains, “The importance of cash flow is the ability to pay for goods and services when they fall due. Profit is a snapshot of how much money the company’s earned after expenses, but that doesn’t mean that the cash flow is in a healthy position.”

In fact, many companies confuse high profit with good cash flow. While the two are somewhat intertwined, improving cash flow in business is much more about forward thinking, planning and strategy.

“In a growing business, cash flow management gets increasingly harder because although you may have good margins and you’re making a profit, there’s a lag in time before that money is available to you, and therefore the cash flow runway is restricted,” Sam explains.

Cash flow runways and forecasts

A cash flow runway is the period a business can operate before it runs out of money. Having a clear understanding of your cash flow runway helps you plan and ensures the business can cover its expenses for a set period.

Cash flow forecasts are equally important as they predict future cash inflows and outflows, allowing businesses to prepare for potential shortfalls. “Cash flow forecasts are a good tool and indicator of when your business can pull certain growth levers or, conversely, restrict unnecessary spend,” says Sam. “They’re essential to ensure you don’t spend money today that you may need in the near future.”

So, what are some practical strategies for managing your business cash flow opportunities and issues?

6 simple strategies for improving cash flow in business

Review pricing structures: Ensure pricing covers your costs and desired profit margins. Regularly review and adjust prices to reflect market conditions.
Increase sales: Implement more layered brand marketing strategies and explore new markets and product verticals to boost revenue.
Control expenses: Regularly review expenses to identify and cut unnecessary costs.
Faster payment collection: Implement stricter payment terms and follow up on overdue invoices promptly using appropriate accounting software.
Inventory management: Utilise technology to maintain optimal inventory levels, reduce any holding costs and free up cash.
Supply chain management: Negotiate better terms with suppliers to improve cash flow timings. Where it makes sense for your business model, early payments can sometimes create opportunities to discuss discounts with appropriate suppliers.

Explore our recent article on managing cash flow strategies to find out more.

Business cash flow solutions for working capital finance

Working capital finance products like debtor finance and trade finance can significantly improve cash flow.

Debtor Finance cash flow benefits

Debtor finance provides an instant cash injection by unlocking funds tied up in unpaid invoices. This liquidity helps cover operational expenses, supplier payments and even fund growth opportunities.

Sam advises, “Debtor finance can give you the cash flow required upfront. So if you need funds earlier, you’ve got the certainty of borrowing against your invoices rather than waiting for those payments to arrive under the original terms.”

Businesses that access debtor finance can execute more effective financial plans by better managing cash flow fluctuations and the uncertainty associated with extended payment terms or delayed payments.

Unlike traditional loans, debtor finance requires no personal assets as security. This flexibility allows you to access funds when you need them, without risking valuable assets.

Trade Finance cash flow benefits

Trade finance offers substantial cash flow benefits by providing a tailored line of credit that bridges the gap between purchasing and selling goods. This funding solution ensures that businesses do not have to tie up their cash flow in inventory that takes weeks to arrive, process and sell.

By introducing a financial partner, such as Octet, into the supply chain, businesses can access funds to pay suppliers immediately, whether they are local or overseas. This enables the business to maintain healthy cash flow, as they can repay the credit facility over time rather than having their working capital tied up in these often lengthy transactions.

Because you can set a competitive exchange rate for the transaction upfront, trade finance can also safeguard against currency fluctuations. This supports smoother and more predictable financial management and helps increase your business’ purchasing power.

Where to go for business cash flow solutions

Implementing effective cash flow management strategies and leveraging working capital finance products can help you confidently navigate economic uncertainties. But staying on top of business cash flow and utilising these strategies and products can be a complex exercise, even for the most experienced of operators.

That’s why seeking professional advice is often a good idea. Financial planners, accountants, commercial finance brokers and business finance experts can all provide valuable insights and tailored solutions. For earlier growth stage businesses, it’s really important to consult widely in order to find the most suitable cash flow advice for your unique business circumstances.

Keep your cash flowing

Improving cash flow is essential for business stability and growth. At Octet, we’re here to support your business at every stage, offering expertise and financial solutions tailored to your needs. Our working capital products are designed to help businesses in all industries manage cash flow effectively.

Our team can provide guidance on leveraging innovative supply chain finance solutions and tools to maintain consistent cash flow, crucial for sustaining and growing your business in these challenging conditions.

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.

What is invoice financing? A comprehensive guide

Posted on June 19, 2024September 4, 2024 by Duncan Khoury

Maintaining robust cash flow, navigating slow sales periods or capitalising on growth opportunities are several reasons why businesses might seek additional funding sources. These businesses will discover that there are many financial solutions available, and choosing the most suitable one can be daunting.

Invoice financing, also referred to as debtor finance, is a funding mechanism that allows companies to unlock capital tied up in their outstanding B2B invoices. It’s the ideal funding solution for businesses experiencing rapid expansion.

As a business owner, if you’ve started researching invoice financing no doubt you’ve encountered a range of terms, definitions and financial products, such as invoice funding, invoice factoring, and confidential and disclosed offerings. So, what is invoice financing, what are its benefits, and how can it serve your business? We explore these questions, uncovering the financial instruments available and their role in supporting businesses across various sectors.

How invoice finance works

Efficient cash flow is vital to establish, operate and grow a business. Solid cash flow allows a business owner to sustain operations during quiet periods and seize new opportunities to expand their offerings. It’s vital for business growth and to forge strong ties with suppliers and partners by ensuring timely payments.

However, cash flow can stagnate if you experience delays in customer payments. This is where invoice finance comes into play, providing immediate access to the capital bound in your company’s outstanding invoices.

Sam Ralton, Octet’s Director of Working Capital Solutions, explains. “There are several terms for these products. Invoice finance, receivables finance, debtor finance — they all cover the same broad offering, which considers the receivables ledger or the outstanding invoices, and facilitates funding against them.”

There are primarily two approaches to financing outstanding receivables and ensuring a consistent cash flow: invoice factoring and invoice discounting. Let’s delve deeper into these methods.

What is invoice factoring?

Invoice factoring is a form of invoice finance where you bring your B2B accounts receivable to a financing company. This financier then provides you with a substantial portion (typically up to 85%) of the invoices’ value immediately in exchange for a small fee.

The financing company takes over collecting and processing payments from your customers or clients. After the financier has recovered the amounts due, they will forward the remaining funds to the business, deducting a nominal service fee.

By transferring the debt collection task to a finance company, you may reduce administrative expenses and free up your team’s time. The drawback is having slightly less control over some operational interactions with your clients.

Factoring services often include the management of the sales ledger, such as allocating payments and issuing statements and reminders. As a result, the costs might be higher than other invoice finance services. It’s also apparent to your clients that a third-party financier is involved, as they will direct their payments to the financier.

Sam says you probably won’t hear the term ’factoring’ in contemporary finance as reputable finance providers like Octet offer more tailored invoice finance solutions and collaborative partnerships. “Invoice factoring used to be fairly intrusive. Businesses found they had to hand in every invoice, and the financier would chase up the debts.

“At Octet, we have finance relationship managers who are constantly collaborating with clients to identify cash flow issues or opportunities and assist with these.”

What is invoice discounting?

Invoice discounting is different from invoice factoring in one crucial aspect: debt collection remains your responsibility. Invoice discounting typically applies to the total ledger balance, rather than individual invoices. So, this approach can help even out cash flow variances throughout a given period.

This method allows you to retain the management of your sales ledger, so is more appealing to businesses that want to maintain control over this vital component of operations. As such, invoice discounting offers more confidentiality; your customers remain unaware of the financing arrangement with your financier.

Let’s further explore the differences between a confidential and disclosed facility.

Confidential and disclosed invoice finance: a comparison

A confidential invoice finance arrangement is one where your customers are unaware that a financing company is involved. Here are a few things to consider:

There is no obligation to disclose to your customers — the debtors — that your business is using invoice finance, nor does the finance company generally contact them.
Once your confidential facility is approved and established, you’ll inform your debtors of a change in bank details to a new account, which the financier manages on trust.
You submit invoices to both the financier’s platform and your customers. The finance company advances up to 85% of the invoice amounts to you. Following your customers’ payments into the trust account, the finance company will send the remaining balance to you after deducting a service fee.
This method allows you to continue your established accounts payable processes. While you retain the duty of managing payments, you also maintain full control over customer relationships.

Conversely, with disclosed invoice finance, all parties know and consent to the financing arrangement. Here are a few things to consider:

Your invoices will inform your customers about the involvement of the third-party financier, who will also have the authority to pursue outstanding payments.
With a disclosed facility, the finance company reaches out to your customers when an invoice is submitted. These customers will pay into a financier-managed trust account, knowing it is separate from your business’ account.
You might have to pay higher fees for a disclosed facility due to the finance company’s increased involvement in implementing its own debt management strategies.
Like the confidential method, you receive an advance of up to 85% of the total invoice value quickly. The finance company then takes on the role of coordinating with your customers to secure payment. When your customers fulfil the invoice, the finance company transfers the remaining funds to you, less their fees.
This option also delegates the debt collection process to the financier and ensures transparency for everyone involved.

Choosing between confidential and disclosed

So, which is best for your business — confidential or disclosed financing? That depends on a couple of factors. Firstly, the strength of your business’ credit rating. A solid rating may qualify you for confidential options and the corresponding lower fees.

Secondly, your preference for control. Some businesses will want to retain direct management of debtor relations, while others prefer to outsource it.

As businesses become more comfortable with external management of their debt collections and customers become accustomed to third-party involvement, using a financier makes sense as a strategic cash flow decision. Leveraging one of your most significant assets — your receivables — can accelerate your business growth, benefiting you, your suppliers and your customers.

The advantages of invoice finance

Why opt for invoice finance instead of traditional financing methods like a bank loan? Sam weighs in.

“A significant limitation of traditional bank financing is that banks like ’bricks and mortar’ assets, often insisting on property collateral to back business loans,” he says. “The problem is, not all companies have ample property assets for collateral, nor are they inclined to risk the personal assets of their directors.

“Invoice finance, by contrast, uses what is frequently the company’s largest rolling asset — the accounts receivable ledger. This ledger represents the cash customers owe to the business and it typically lies dormant until the payment terms are met. An invoice finance agreement leverages this asset for funding, circumventing the need for property or other personal guarantees.”

Banks are also notoriously slow to respond to funding applications, with some finance approvals stretching beyond six months. This delay means businesses suffer even more cash flow challenges or forfeit opportunities. Invoice finance arrangements, however, can be authorised in a fraction of that time.

Is invoice finance right for you?

When evaluating an invoice finance option for your business, there are a few things worth considering:

The associated costs will vary based on the financier, the specific product, the amount of management required by the financier and whether the arrangement is confidential or disclosed.
“Typically, costs are the interest rate on the borrowed sum and a service fee,” explains Sam. “There might be more work in a disclosed invoice finance facility, as the financier regularly assesses the ledgers.”
Sam adds that in his experience, the fees are only marginally higher than those of a conventional mortgage or overdraft.
The appropriateness of invoice finance will depend on your business requirements. Sam says some businesses have had negative experiences with invoice finance, but this is generally because the financier or product was unsuitable in the specific circumstances.
Apprehensive about relinquishing control of your ledger management to a financier? It’s a legitimate concern, so it’s even more important to partner with the right financier. Seek out an invoice finance company with a robust track record, advises Sam. “Trust in the stability of the financing company is crucial.”
Sam cautions against using finance companies offering rapid solutions. “There are many out there providing short-term loans at steep interest rates. These are quick fixes and aren’t conducive to long-term business viability. Partner with a financier who is committed to supporting your long-term business vision.”

Is your business ready for an invoice finance solution?

Consider these questions:

Due to your payment terms, is your business experiencing cash flow issues?
Are you unable to restock until invoices are paid?
Do you want faster-moving cash flow to ease the pressure?
Are there growth opportunities you want to pursue but can’t until you sort out your cash flow?
Do you contract with large corporations that set longer-than-average payment terms, leaving you with a shortfall?
Are you unable, or don’t want, to provide security like property to access funding?

If you answer yes to any of these, it’s worth considering invoice finance for your business.

“Most businesses that speak to Octet about invoice finance have high supply costs,” says Sam, who gives the example of a Western Australia labour-hire company that experienced depleted cash flow after taking on new customers. Octet provided a $2 million invoice finance facility and the cash flow injection helped the company increase its revenue significantly.

A NSW-based labour-hire company was in a similar position. In just seven years it had grown from a startup to turning over $30 million. Its bank couldn’t support its finance needs and the business had to turn away new work. So it approached Octet for a $9 million invoice finance facility. This allowed it to keep taking on new customers while paying its invoices on time.

Invoice finance allows businesses in a growth stage to more easily fund their operation without having to wait for debtors to pay.

“These facilities grow with the business,” says Sam. “As you raise more invoices, you can generally access more funding.”

Octet, the invoice finance experts

With Octet’s Invoice Finance facility, you can convert up to 85% of your unpaid invoices to cash within 24 hours. Use this cash to more quickly pay suppliers, buy equipment, invest in more stock or expand your business via staff growth or product and marketing innovation. The solution is fast and flexible — use it as your primary funding source, or only for top-up funds

Octet’s Invoice Finance is available to new businesses, growing companies or well-established enterprises. We like to see an annual turnover of at least $1 million, an outstanding invoice value of $100,000+, and some demonstrated business trading history. But feel free to get in touch if you’re growing fast and turning over $500,000 or more, as we may be able to assist.

When looking for an invoice finance solution for your business, partnering with a reliable financier is essential. Since 2008, we’ve offered a suite of working capital solutions, with Invoice Finance among our specialties. Connect with us today to explore how we can fuel the expansion of your business.

Transforming complex financial challenges into sustainable growth: Smart working capital finance solutions

Posted on June 17, 2024September 4, 2024 by Russell Walsh

Securing the right financial support from major banks is a common challenge for many businesses, especially those in industries requiring agility and tailored solutions. Traditional lenders often don’t address the specific needs and pressure points of these more complex business groups. Rising fees, rigid loan terms, and a lack of flexibility can stifle growth and operational efficiency, leaving businesses in desperate need of a more tailored approach to financing. This was the situation faced by this business consortium that operates across multiple industries, until they found a comprehensive working capital finance solution with Octet.

Struggling with financial constraints due to complexities of the business

In 2022, the directors of an interconnected group of companies, working across multiple industries, faced a daunting challenge. As new majority owners, they inherited several businesses struggling with cash flow issues and strained lender relationships. The relationship with their primary bank lender had soured, and rising fees from non-bank lenders compounded their financial woes. Two of their businesses, operating in the meat industry, demanded quick, reliable funding solutions, but their existing financial arrangements were not meeting their unique requirements.

The primary goal of the consortium was to gain more buying power and growth opportunities. They needed a financier who understood their business’ pressure points and could provide a comprehensive, tailored financing solution. Their business operations, particularly in meat wholesale, required a flexible approach due to the perishable nature of the products, which typically operate on shorter financing terms. Through their commercial finance broker, the directors sought a lender who could consolidate their multiple financing needs into a single, cohesive package.

Octet’s innovative supply chain finance: A flexible cash flow strategy

Enter Octet, with a bespoke working solution that addressed all of the business needs across the consortium. Initially working on a financing arrangement for one of the consortium’s operations, Octet was able to extend this to provide a comprehensive financing package that included a $4.25m debtor finance limit, $2m trade finance limit, and a $600k asset finance facility. This all-encompassing approach was designed to alleviate the pressures faced by the group.

Octet’s solution enabled one of the business directors to release the mortgage held over their home and terminate their trade facility with the bank. Additionally, by bundling all their financing needs into one package with Octet, the business was able to pay out, or reduce, the other remaining facilities with multiple non-bank lenders.

One of the most significant aspects of Octet’s solution was its tailored approach to the meat wholesale sector. Despite the industry’s challenging financing conditions due to the fast turnover of the products, Octet crafted a financing plan that provided the business with much-needed speed to market. This agility allowed the directors to secure supplier discounts by ensuring quicker and more regular payments, setting them apart from competitors.

Immediate and long-term benefits for the business

The impact of Octet’s financing solution was immediate and transformative. Within the first 24 hours of finalising the facility, the company was able to disburse $1.4 million in trade payments to their major suppliers. This rapid injection of working capital not only stabilised their operations but also enhanced their purchasing power.

The benefits extended beyond immediate financial relief. The new financing structure allowed the business to focus on strategic business planning and growth, rather than constantly managing cash flow issues. The agility provided by Octet’s tailored solution enabled the business to purchase more stock across different operations, breaking free from the constraints of their previous non-aligned terms.

With Octet’s comprehensive support, the company gained the financial flexibility and stability needed to thrive in the competitive meat industry. The partnership with Octet not only resolved their immediate challenges but also positioned the group of interconnected companies for sustainable growth and success, demonstrating how a well-structured and flexible financial partnership can turn around business fortunes and set a course for future prosperity.

Grow your business with Octet

Via our Referral Partner Program Octet empowers businesses across a range of industries, including food and beverage, manufacturing and transport, offering innovative Debtor Finance and Trade Finance working capital solutions.

Speak to our team of working capital specialists to see how we can power your business growth today.

Disclaimer: These 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.

Factoring and invoice discounting: debtor finance solutions for cash flow management

Posted on June 5, 2024September 4, 2024 by Duncan Khoury

Effective cash flow management is critical to business success. But slow-paying customers, tightening supplier conditions and inflexible bank terms can all affect cash flow. Even thriving businesses keen to capitalise on growth opportunities can face roadblocks due to cash flow fluctuations.

Many businesses are turning to debtor finance as a strategic financial solution. Whether you’re a commercial finance broker looking for the best deal for your clients or a business owner facing the daily challenge of managing cash flow, you understand the common challenges. Perhaps you’ve even explored debtor finance products such as factoring and invoice discounting but want to know more about leveraging outstanding invoices to access efficient working capital. In this article, we explore why more and more businesses are turning to this effective financial solution.

Common cash flow challenges

Businesses today face a range of cash flow challenges. Whether it’s customers delaying payments, renegotiating longer terms, or suppliers shortening or eliminating payment terms, Octet’s Director Working Capital Solutions Dan Verdon has heard it all. “The current challenging economic conditions are putting a strain on cash flow, but many business owners hesitate to address these critical issues early. That’s a mistake.”

Even thriving businesses are feeling the pinch from their traditional finance partners. “The banks and larger lenders are becoming slower and less responsive when providing loans that support business growth,” Dan says.

“Dealing with changing account managers and lengthy processing times is really frustrating for businesses in various stages of growth. Debtor finance is a reliable alternative to a traditional bank loan, offering businesses confidence in accessing working capital quickly and easily.”

Do any of these cash flow challenges affect you?

late-paying customers
restrictive bank conditions
extended payment terms.

Debtor finance could be the answer.

Take control of your cash flow with debtor finance

You might have heard the terms factoring and invoice discounting, invoice financing or invoice funding. But what do they actually mean?

They’re all broadly debtor finance solutions. Invoice factoring involves a business selling its accounts receivable to a financier, who gives them an upfront payment (up to 85% of the invoice value). The financier collects payments from the business’ clients, takes a small fee and passes the remaining funds onto the company. Invoice discounting is similar but with a critical difference — it’s the business, not the financier, that collects the debts.

The terms invoice factoring and invoice discounting are used less these days, as innovative finance providers like Octet offer more tailored debtor finance solutions.

These facilities use a major asset already in the business — the unpaid customer invoices — to sustainably meet its cash flow requirements. Debtor finance is tailored for growth and can reduce cash flow risk.

Joe advises his business clients to set up a debtor finance facility before they need it. “There is a small service fee to have the facility there, but this fee is upfront and predictable, and you only pay interest when you draw funds.”

While debtor finance helps mitigate cash flow gaps and maintain stability during volatile periods, Dan says this type of finance isn’t just for businesses facing challenges. “Debtor finance is used by many thriving, growing businesses looking for a line of credit to appropriately manage their cash flow.”

Businesses use debtor finance to:

enhance liquidity to meet operational needs and explore growth opportunities
take advantage of a tailored solution to suit their needs and cash flow cycles
streamline collections and administrative tasks
unlock potential for expansion and take on new projects
access expertise and tools for efficient credit control and debtor management.

Why brokers and businesses choose Octet for debtor finance

Dan says businesses in a range of industries access debtor finance to help grow their business. “Common industries we service include labour-hire, food and beverage, manufacturing and wholesale. But whatever industry you’re in, if you’re a B2B business, debtor finance can work for you.”

While many business owners are considering their financing options, brokers are also exploring solutions for their clients. Brokers can play a crucial role in helping businesses navigate these cash flow challenges and make informed financial decisions.

“Whether you’re a business owner, a broker or an accountant, if you’re considering debtor finance, take the time to assess the business’s financial position, cash flow forecasts and growth objectives before speaking with a financier.

“Our advice to business owners and brokers is to partner with reputable providers. At Octet, we offer a broad range of working capital solutions tailored to each business.”

Businesses that access Debtor Finance through Octet:

get up to 85% of business invoices as a cash advance
can access funds without personal asset security
enjoy the flexibility of their debtor finance facility growing as their receivables grow
can seamlessly integrate the facility with their existing accounting software such as Xero and MYOB AccountRight.

Are you a commercial finance broker? Simply refer your client, and we’ll handle the rest.

Tailored debtor finance solutions for every business

Octet’s Debtor Finance solutions are designed for businesses to meet cash flow challenges, better manage fluctuations, capitalise on opportunities and grow. Whether you’re a business owner ready to explore their finance options or a broker who wants to see their client’s business soar, debtor finance could be the solution for you. Get in touch today.

Disclaimer: The above 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.

Debtor Finance: Empowering expansion for an innovative beverage company

Posted on June 4, 2024September 5, 2024 by Russell Walsh

In the competitive landscape of the beverage industry, staying ahead of trends and capitalising on emerging opportunities is key to success. One Australian beverage company, renowned for its innovative approach to health-conscious alcoholic beverages, recognised the need to secure flexible financing to fuel its growth aspirations.

With a vision to become a leader in the Australian market, the company worked hard to secure retail distribution and launch its premium products. However, to fully execute its strategic plans, it required additional working capital to support its expansion initiatives.

Addressing cash flow challenges

Understanding the critical role of cash flow management in sustaining business operations and driving growth, the company sought out financing options tailored to its needs. Via consultation with their commercial finance broker, they identified debtor finance, also known as invoice finance, as the ideal solution.

Turning to Octet, the company found a strategic partner that understood the intricacies of its business and the challenges it faced. With the support of Octet’s Director of Working Capital Solutions, Dan Verdon, they were able to navigate seasonal trading demands and fulfill their contractual obligations, all while maintaining financial stability.

Achieving growth targets through financial agility

Thanks to the flexibility and responsiveness of Octet’s debtor finance facility, the business was able to focus on delivering new contracts and expanding its brand presence. From securing major deals with leading retailers to preparing for key trading periods, the company hit its growth targets with confidence.

“With the right finance in place, the company could confidently work with large retailers and build their brand – without having to worry about a lack of cash flow restraining their growth,” says Dan.

Furthermore, with the additional funding provided by Octet, the company was able to explore new channels, invest in product development, and drive distribution opportunities, setting the stage for continued success.

Embracing the future with confidence

As the company looks to the future, it remains committed to its growth trajectory. Having recently launched innovative products and with plans for aggressive market expansion, the company is poised for continued success.

With Octet as a trusted financial partner, providing ongoing support and flexible financing options, the company is well-equipped to navigate the challenges and opportunities that lie ahead. By leveraging the power of supply chain capital finance, the company is primed for sustainable growth and market leadership.

For businesses seeking to unlock their growth potential and optimise cash flow management, Octet offers a strategic solution. With the right partner by your side, the possibilities for expansion and success are endless.

Dan adds, “It helps build business resilience when you have the financial tools at your disposal to move with market demand.”

Grow your business with Octet

Via our Referral Partner Program Octet empowers businesses across a range of industries, including food and beverage, manufacturing and transport, offering innovative debtor finance and other working capital solutions, including Trade Finance.

Speak to our team of working capital specialists to see how we can power your business growth today.

What is business finance? The key to sustainable growth

Posted on May 27, 2024June 3, 2024 by Duncan Khoury

For businesses planning for growth and longevity, an understanding of business finance is not just beneficial. It’s essential. This knowledge helps safeguard financial health and equip businesses to make strategic decisions, ensuring they thrive in competitive markets.

In this article, we’ll answer the following questions: What is business finance, what are common financing options, and when is it time to seek finance?

Tim Bowring, Octet’s Head of Sales, Health, also helps us explore the business financing options for the health and pharmaceutical industry. But regardless of the industry you operate in, these insights will help you to better understand the business finance options that can help your business grow.

Understanding the best finance options for your business

Business finance encompasses all types of financial activities crucial for day-to-day operations and long-term planning. It includes managing cash flow, budgeting and funding strategic initiatives.

Tim says businesses must first grasp how cash flow works when it comes to understanding finance. “Cash is king. It pays the bills and repays debt. Having a good picture of how your cash flow works will set you up to understand the most appropriate finance options available to your business.”

Tim says when looking at types of finance, there are several key factors to consider, such as:

How often will you want to draw down on the facility?
How quickly can you repay it?
Are there ongoing fees to be paid if you haven’t used the facility or drawn all of the limit?
What security do you need to get the finance?

“One common misconception is that the lowest interest rate is the most important thing,” he adds. “But the interest rate isn’t always paramount.”

When it comes to the healthcare sector, Tim helps secure funding for businesses who work with him on a range of needs, including:

paying ongoing wages for locum doctors and dentists
importing stock and equipment
manufacturing medical supplies and pharmaceuticals
covering IT service contracts.

Business financing options

There are many financing options for managing and growing a business. Many businesses rely solely on internal sources of funding (so the funds they generate as part of operations).

When seeking external sources, most business owners will be familiar with traditional forms such as bank loans and lines of credit. However, most businesses are experiencing tightening conditions, and banks can take months to approve finance applications. Banks also often seek personal security and collateral, which is a drawback for businesses that don’t have significant assets or don’t want to risk their director’s personal assets.

Equity financing is also an option for start-ups and growth-stage companies without steady cash flow. However, this dilution of ownership and long-term commitment are significant drawbacks of this type of finance.

Trade finance and debtor finance (also called invoice finance) are two other types of business financing options. Trade finance products help facilitate international and domestic transactions, mitigating risks and facilitating smooth transactions between buyers and sellers.

“If you have to pay for stock on delivery, for example, trade finance can provide you with extended terms,” says Tim. “If you have short payment terms, there are even ways to negotiate an early settlement discount with the supplier.”

Debtor finance (also called invoice finance) helps bridge cash flow gaps by allowing businesses to borrow against their receivables ledgers.

“A business that’s growing rapidly by offering competitive credit terms to its customers is likely creating a cash shortage in the business,” Tim says. “If it is buying stock that is paid at order or shipping, it is also negatively impacting the business’s cash flow. Invoice finance can unlock up to 85% of invoice values immediately, which is essential for maintaining operations and funding growth.

“In today’s challenging environment, businesses are feeling the cash flow pinch. The key to managing cash flow gaps is often intelligently tailoring the right business finance solution for your supply chain and growth requirements.”

Healthcare companies particularly rely on a smooth-flowing supply chain to support patient wellbeing and ensure the timely availability of medical and other supplies. For many businesses operating in the industry, business finance to manage cash flow is crucial to safeguard their supply chain and network.

Ready for better business finance? What you need to know

Before applying for any variety of business finance, Tim recommends preparing by having a detailed cash flow forecast and identifying any cash flow gaps. “Then, make sure you ask plenty of questions of the financier about their processes and the specific product/s to see whether they’re a suitable fit.”

Questions include:

What security is required to obtain the facilities?
What are the line or service fees?
Does the facility or platform protect my business from risk when importing from overseas?
What is the speed of transactions?
How can you support my businesses to achieve growth, whilst making informed financial decisions?

“Octet has a proven track record of supporting Australian businesses. Whatever industry you’re in, we can help you accelerate supplier payments, general cash flow and foster stronger relationships with customers and suppliers with our Debtor Finance and Trade Finance solutions.

“The Working Capital Specialists at Octet will work with you to help you better understand your cash flow, where the gaps are and what options are available for funding those gaps.”

For those in the healthcare and pharmaceutical industry, these solutions can mitigate the unique challenges faced by the industry and make the most of growth opportunities.

Discover the best business finance fit for you

For many businesses, accessing appropriate business finance is crucial to achieving sustainable growth. Octet is committed to supporting businesses through tailored financial solutions, helping them understand their cash flow and funding options and ensuring they are well-positioned to seize growth opportunities.

Whether you’re in the healthcare industry and need timely supply finance chain solutions, you’re a labour-hire company with cash tied up in unpaid invoices or a manufacturer seeking new trade opportunities, we can help. Want to know more? Get in touch with the team today.

Commercial finance brokers: Making an impact via smart invoice finance solutions

Posted on May 6, 2024June 3, 2024 by Russell Walsh

In the ever-evolving Australian business landscape, a family-owned wholesale steel supplies business sought to navigate the transition from growth right through to retirement. Facing financial hurdles amidst rapid expansion, on the advice of their commercial finance broker, they turned to Octet for tailored working capital solutions. Via a strategic partnership between the broker and Octet, the business created a clear runway to reach their goals.

Transitioning from solid growth to retirement

Under the management of a husband-and-wife partnership, this family-owned enterprise had flourished, boasting an annual turnover of $18 million. With projections indicating a climb to over $25 million in sales within two years, the future appeared promising.

However, financial complexities emerged. While ANZ provided vital support, including a $200,000 overdraft and a $1,000,000 Commercial Loan Facility, encumbrances against their home and accumulating shareholder loans strained personal finances. With retirement goals in mind, the owners aimed to fortify their superannuation, setting a target of $2 million for extra peace of mind.

Octet’s Debtor Finance Facility: A strategic cash flow solution

Recognising the delicate interplay between personal and business finances, the family-owned business sought expert guidance. Their broker engaged Octet, offering tailored working capital solutions to address the business’ complex needs.

Octet’s Debtor Finance Facility emerged as the appropriate strategic tool for financial agility. Leveraging the business’s approved $3 million receivables ledger, the facility provided an 80% advance, ensuring immediate access to funds. This facilitated settlement of the existing ANZ facilities, freeing the family from personal debt.

“This liquidity fueled the business’ growth aspirations and facilitated loan payoffs, marking a significant milestone for the business,” said Brendan Green, Octet’s General Manager – Working Capital Solutions.

Empowering retirement and financial resilience

Empowered by this financial restructuring, the business owners redirected their focus towards retirement planning. With an after-tax contribution of $100,000 into their superannuation and adjusted loan repayments, they aimed to bolster their super balance to $2 million over a decade.

Through the guidance of their broker, and smart working capital solutions from Octet, this husband-and-wife team avoided anchoring their retirement solely on potential business sales, ensuring financial resilience regardless of any outcomes.

Says Brendan: “With some expert advice and strategic manoeuvring, the business owners overcame challenges, aligning personal and business finances for a prosperous future.”

Grow your business with Octet

Via our Referral Partner Program Octet empowers businesses across a range of industries, including labour hire, manufacturing, wholesale and transport, offering innovative debtor finance and other working capital solutions.

Speak to our team of working capital specialists to see how we can power your business growth today.

Debtor Finance: A smart solution for the labour hire sector

Posted on May 2, 2024September 5, 2024 by Russell Walsh

Labour hire providers, particularly those in industries like mining and industrial services, often face challenges in managing cash flow simply due to the nature of their business. With debtor finance facilities tailored for this sector, companies can overcome cash flow gaps and maintain more efficient operations.

For instance, Octet offers partnership debtor finance lines specifically designed to accommodate the needs of labour hire companies, such as this WA-based labour hire provider.

A Case Study: Octet’s partnership with a labour hire provider

In a recent partnership with Octet, a labour hire business, operating in the mining and industrial sectors, sought a working capital solution to address cash flow challenges associated with its start-up growth phase.

The Managing Director, with previous successful experience in the industry, engaged Octet’s WA Working Capital Director, Nigel Thayer, to structure a flexible debtor finance facility. Despite having only three clients initially and a modest receivables ledger, Octet provided a disclosed debtor finance solution with a $300,000 funding limit.

This implementation enabled the client to access ongoing funding based on business invoicing, supporting payroll needs and facilitating business expansion. With improved cash flow, the company found it easier to attract new clients and fulfill larger labour hire placements, resulting in promising sales growth.

Looking ahead, Octet anticipates increasing the funding limit to further support the business growth ambitions and ensure continued sustainable success.

What is Debtor Finance?

Debtor finance, also known as invoice finance, is a working capital solution designed to assist businesses in managing cash flow by leveraging their accounts receivable balance. It gives businesses quick access to cash by using their unpaid invoices as collateral, receiving a significant portion upfront via an immediate cash injection from a third-party financier, such as Octet. The financier charges a small fee to advance the funds and then collects the full payment from the customers when the invoices are due. Its appeal continues to grow, evidenced by increasing interest from businesses across various sectors.

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

The advantages of debtor finance for labour hire

Debtor financing offers several advantages for businesses similar to start-up labour hire businesses in the mining and industrial sectors:

Immediate cash flow optimisation: Debtor financing swiftly transforms outstanding invoices into accessible cash reserves. This enables start-up labour hire enterprises to efficiently address critical operating expenses such as payroll and strategic expansion initiatives.
Tailored flexible funding: Octet’s debtor finance solutions are structured to accommodate the requirements of emerging labour hire providers. This tailored approach ensures adaptability to fluctuating demand and facilitates agile responses to unforeseen opportunities, empowering businesses to navigate uncertainties with confidence.
Strategic growth opportunities: With a stable cash flow foundation secured through debtor financing, start-up and more established labour hire businesses can strategically pursue growth opportunities. This includes the confident pursuit of new client engagements, the expansion of service portfolios, and the establishment of a robust presence within the dynamic mining and industrial landscapes.

An Octet Debtor Finance facility emerges not only as a financial instrument but also as a strategic enabler for start-up labour hire businesses, offering vital support in managing cash flow dynamics and unlocking growth potential. Partnering with Octet allows businesses at any growth stage the opportunity to improve their cash flow position and more confidently grow their operation.

Says Nigel, “We don’t just look for the large transactions. We can provide debtor finance facility limits below $1 million and can include tax repayment aspects for those businesses that need it.”

Grow your business with Octet

Via our Referral Partner Program Octet empowers businesses across a range of industries, including labour hire, manufacturing and transport, offering innovative debtor finance and other working capital solutions.

Speak to our team of working capital specialists to see how we can power your business growth today.

Unlocking opportunity: business finance options every broker needs to understand

Posted on April 19, 2024September 5, 2024 by Duncan Khoury

Want to better support your SME clients? Managing cash flow is an SME’s number one priority — cash flow gaps can significantly affect operations and hamper growth. As a commercial finance broker, helping your SME clients identify, measure and bridge cash flow gaps will set you apart.

In this article, we’ll explore some key strategies and tips for managing cash flow. So let’s get started with some insights that brokers can use to proactively suggest tailored financial solutions that help to address cash flow challenges and drive business success for their clients.

Identifying cash flow gaps for your SME clients

Clearly, in order for you to offer solutions to your clients, you have to know what the key issues and opportunities are. Identifying cash flow or finance gaps and adding value to your existing service can really help strengthen your client relationships. And it starts by simply getting curious.

Dan Verdon, Octet’s NSW Director of Working Capital Solutions, says there are some simple questions you can ask your SME clients to identify any cash flow gaps:

Do you want to grow your business, or have you identified growth opportunities, but you can’t make it happen? “If the client is finding it difficult to grow to the next level, it might be because they don’t have the right finance in place,” says Dan. “Innovative working capital solutions can really help here.”
Are you finding you must turn away new business? “The client might tell you that they’re having to say no to orders or sales because they don’t have the working capital or the cash flow to actually service that customer or take care of those additional orders.”
Are your customers taking a long time to pay their invoices? “We often hear businesses complain that some of their customers take a long time to pay. They might be big businesses and good payers, but they take up to 70 days to pay. If you ask your SME clients what their average debt turn is and they say it’s beyond 30 days, that can cause cash flow issues.”

Business finance options

You’ve identified your client’s cash flow gaps and think a working capital solution might be the answer. So, is using debtor finance the best solution or is a trade finance facility the way to go? Could these solutions actually work together to help accelerate cash flow? Ask yourself, what is the best fit for my SME client and their unique supply chain and business requirements?

The good news for you is that there are solutions that can address these cash flow gaps. Today’s businesses have a range of finance products at their disposal, but beyond traditional forms of credit such as bank loans and credit cards, they might not fully realise their options.

Octet provides working capital solutions for SMEs across a range of industries. These solutions help improve cash flow and ensure the smooth operation of a business.

To explore growth opportunities

Debtor finance, also known as invoice financing, is a solution for businesses to access funds tied up in their receivables ledger without the need to use personal security or other collateral. It provides quick access to cash by leveraging unpaid invoices as an immediate cash advance.

A debtor finance facility can provide a robust solution where your client has a good business but encounters cash flow issues due to slow B2B payers.

With a debtor finance product (also known as invoice finance), the financier will effectively lend against the business’ accounts receivable ledger and provide quick access to cash, bridging the gap between when invoices are raised and when they are paid. There’s generally no need for personal security or collateral.

When fabricated steel supplier Builders Steel Direct wanted to seize a growth opportunity, it was hampered by strict bank conditions. The business came to Octet for a range of solutions, including a debtor finance facility that enabled the investment in new premises and machinery, leading to a significant increase in revenue.

“Octet’s got a proven history of facilitating growth for businesses,” says Dan. “Builders Steel Direct is a great example of that.”

To increase purchasing power

A trade finance facility could also be what the business is seeking. This revolving line of credit allows businesses to pay their suppliers quickly, mitigating some of the financial trade risks and allowing them to keep their supply chain moving smoothly. It also allows businesses to explore new trade opportunities.

“When you think of trade finance, many people immediately think of paying overseas suppliers. But it’s just as effective for paying domestic suppliers,” says Dan.

With trade finance, the financier pays suppliers immediately (which tends to keep them happy) and gives the business up to 120 days to repay.

Octet’s trade finance facility was the perfect solution for wellness retailer Go Vita. The business was increasing its number of suppliers and opening new stores but didn’t want its cash flow tied up in the process. The Octet facility allowed Go Vita to pay suppliers without delay while keeping its supply chain moving and the business growing.

Partner with Octet to power your SME clients

So, you’ve established that your client is interested in a working capital solution like a trade or debtor finance facility, but what’s next? Think Octet.

Unlocking a world of business possibilities since 2008, we have the experience to power a range of businesses across many industries. Our clients trust us to handle more than $4 billion in supply chain transactions every year.
We make it easy for commercial finance brokers, especially those who don’t work with these types of products every day. We structure the facility, help promote it to your clients, answer their questions whilst your brokerage reaps the rewards. Learn more about our Referral Partner Program, including the exclusive Qantas Business Rewards referral offer.
Our business clients choose Octet, and brokers refer their clients to us because we provide simple, fair and fast financing solutions. For example, with our streamlined Supply Chain Platform, businesses can track and manage every stage of their supply chain process, improving transparency and security for all parties.
We know your relationships are important, and we will keep you updated so you can continue to leverage the positive relationships you’ve built with your clients. Partnering with an established financier like Octet helps to cement your reputation and credibility.
The process is straightforward. Simply refer your client, and we handle the rest. After the initial meeting, you provide the business’ financials for our review. We’ll then walk your client through the recommended product and provide an indicative offer where appropriate. Once the offer is accepted, we settle the deal and get started. Your clients can then track, validate and authorise every stage of their transaction via our intuitive supply chain platform, enjoying all the benefits of having accelerated business cash flow.

Discover how to partner with Octet today

Octet partners with commercial finance brokers nationwide to help them empower their business clients. Do you have clients who could benefit from smarter working capital solutions? Get in touch with us today to discover how we can power your SME clients’ growth.

What is debtor finance? A comprehensive guide

Posted on April 8, 2024September 5, 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.

Healthy balance sheets and why they matter

Posted on March 25, 2024May 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.

Growth finance: how flexible business finance funds progress

Posted on January 8, 2024September 5, 2024 by Duncan Khoury

Businesses face many challenges, and when they strive to grow, they often find that growth hampered by inadequate funding, or working capital. So how do they evolve?

In this article, discover the factors that limit business growth and explore why using cash in the bank or profits is sometimes an unsustainable approach to funding growth. If you’re ready to progress your business, it’s time to consider growth finance and find out how tailored working capital solutions can provide the right support for sustainable growth.

Growth challenges: why most businesses fail to grow

Is your business failing to grow despite your best efforts? Business growth can be difficult at the best of times, but in an environment of global uncertainty, rising inflation and slowing economies, even the world’s most successful companies are struggling to increase revenues.

McKinsey & Company conducted a wide-reaching study of the growth and performance of the 5,000 largest public companies in the world over the past 15 years. The average revenue growth in the 10 years before COVID-19 was just 2.8% a year. Only one in eight businesses surveyed enjoyed a growth rate of more than 10% a year. The post-COVID-19 years haven’t been any easier.

Economic conditions aside, businesses also make common mistakes when trying to expand. Octet’s NSW Director of Working Capital Solutions, Dan Verdon, identifies a few factors that can hinder meaningful growth and, therefore, profits.

A need for more strategic planning. “Businesses with a well-defined and communicated strategy, which aligns with their short-, medium- and long-term goals are much more likely to be successful.”
A need for more capital. “Most businesses underestimate the level of capital required for sustainable growth.”
A need for understanding where cash flow is tied up in the business. “There are four main cash flow levers: accounts payable, accounts receivable, inventory and their own cash. Understanding how to use each of those sources and when is really important.”
Scaling too quickly. “A lot of businesses might have a good product or a good service, but they grow too rapidly and then can’t sustain it.”
A need to acquire and retain talent. “Attracting and retaining good people, especially in highly skilled roles, is a major challenge for a lot of new businesses.”

The sustainable way to grow

For the best chance of success, it’s also important to identify where to concentrate your growth efforts. McKinsey & Company has discovered that businesses give themselves a much greater chance of outperforming when they invest in three pathways for growth:

Expanding the core business by focusing on excellence in the areas in which they currently operate.
Innovating in adjacent markets by seeking ways to adapt to serve new customers.
Developing breakout businesses by identifying and exploiting new opportunities.

“Having a finance partner who can help you understand what levers to pull and unlock cashflow tied up in your business can help growth in all three areas,” says Dan.

Leveraging business growth finance for expansion

To fund their growth, many businesses set annual budgets based on previous yearly figures and use internal sources of funds, such as their profits or cash in the bank, rather than external financing, such as a loan or line of credit. However, this approach can affect profitability and hamper growth by leaving businesses without the financial flexibility to invest in innovation. While avoiding debt might seem preferable, if profits are down or cash flow slows (say, due to customers taking longer to pay their bills), a business’ ability to scale, innovate and compete effectively is seriously impacted.

As we head into 2024, the economic challenges of high inflation, rising costs and a slowing global economy will continue to put a strain on business profits. Using finance to fund expansion makes sense. “Working capital facilities can support and encourage sustainable growth,” says Dan. “They are self-liquidating, so come with fewer risks than, say, a traditional fixed-term bank loan.”

How Octet can assist with financing business growth

So what are working capital finance solutions, how do they fund expansion and how can a financier such as Octet support business growth?

A streamlined working capital solution, such as Debtor Finance, (also known as invoice finance) allows businesses to access funds tied up in unpaid invoices to accelerate cash flow. By freeing up this cash, a business can capitalise on growth opportunities. This could include importing goods from new suppliers and exploring different product lines.
Looking to expand into different regions? Octet can support your business through a Trade Finance facility. Dan explains: “Say the business is in Australia and wants to expand into another country, but they can’t get finance facilities in that country. With Octet’s facility, they can donate a portion (or all) of the limit to the overseas entity (subject to the Australian parent’s credit assessment) and then use that funding for their overseas business growth requirements.”
Octet can help your business with the process of onboarding new local or overseas suppliers. “We do the verification checks of those suppliers so the business knows they’re trading with someone who is legitimate.”
Octet tailors our flexible funding solutions to a business’ needs. “We bring all the different working capital solutions – debtor finance, trade finance, credit cards – into one smart ecosystem.”
Octet helps businesses increase the visibility of their entire supply chain, allowing them to see and act on potential blocks or gaps. Supply Chain Accelerate is a flexible funding solution that pays 100% of supplier invoices instantly, while giving businesses up to 90 days to repay.

A finance solution that grows with you

Octet has a suite of fast, flexible finance solutions we can tailor to power your business growth. Speak with our team of working capital experts today to discover what’s possible for your business.

Disclaimer: The above 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.

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.

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.

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.

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