Sme invoice SME invoice financing through payment status exchange networkstatus exchange for improved financing scf innopay
- 1. Feasibility Study SME Financing Improving financing through standardised exchange of invoice payment status tomorrows transactions today Douwe Lycklama, Mounaim Cortet
- 2. Finance gap: how to finance long-tail of suppliers with low value invoices? Supplier landscape and available financing instruments (non-exhausitive) Avg. annual spend (invoice value) High Supplier finance: Reverse factoring / Confirming Corporate driven, bank operated programs Focus on strategic suppliers SCF providers enter market (w/ also focus on SME) Receivables finance: Factoring / Asset- Based Finance (ABF) Supplier driven Traditional instruments (factoring, ABP) center on risk mgt, driving costs E-invoicing service providers extend proposition with early payment services Longtail still largely underserved 2 Improving invoice financing. Douwe Lycklama, Mounaim Cortet 31 October 2014. 息 Innopay BV. All rights reserved. # suppliers Low Low High
- 3. Extending our perspective towards large and SME buyers and their suppliers Reverse factoring alone is not enough to tap into the whole SME market Corporate (investment grade) Supplier Large SME 3 Improving invoice financing. Douwe Lycklama, Mounaim Cortet 31 October 2014. 息 Innopay BV. All rights reserved. Independent contractor Corporate (investment Grade) N/A Supplier able to arrange own financing at low rate Large SME N/A Arbitrage not possible. Buyer too small for unsecured credit facility Independent Contractor Focus M3 study (longtail, 80%) Focus existing SCF programs (strategic suppliers only, 20%) Buyer Focus of study
- 4. Long-term vision on SME receivables financing Availability of invoice status information is key enabler of innovation in receivables financing What is it about? Improve financeability of invoices through standardization of invoice status information* Share invoice status information electronically in trusted network (four-corner model) Decouple onboarding (KYC) and financing from the Buyer side Unlock market of large/SME buyers and their longtail suppliers for STP financing Enable different financiers to tap into SME market (banks, factors, alternatives) Why standardization? More insight in quality of receivable invoices Better risk assessment (reduce information assymetry gap) Automated and cost effective SME financing How to realize? Standardize invoice status information Standardize exchange via four-corner model: extend Simplerinvoicing network towards Simplerfinance network Enable financiers to have access to invoice status data (directly via API or indirect) * Status information should ultimately encompass various risk information ranging from simple message by the buyer that invoice has been received to a guarenteed payment of the invoice on date x. Part of this feasibility study is to assess what status information is relevant from a risk management and financing perspective. 4 Improving invoice financing. Douwe Lycklama, Mounaim Cortet 31 October 2014. 息 Innopay BV. All rights reserved.
- 5. Develop standards suite for exchange of invoice status information in four-corner model Standardizing invoice status information and its exchange will unlock the SME market Financier Supplier Buyer 5 6 1 Existing ERP/invoicing solution 5 Improving invoice financing. Douwe Lycklama, Mounaim Cortet 31 October 2014. 息 Innopay BV. All rights reserved. Status Broker 7 Trade 1 2 3 Electronic invoice 4 Invoice approval Finance request 5 Status information broadcast Status information broadcast Existing ERP/invoicing 6 Receivables Finance Model Finance Exchange Status Aggregator 5 solution 7 Pre-payment (deal closure) 6 4 Four-corner model 1 2 3 1 Acceptance Existing ERP/invoicing solution Existing ERP/invoicing solution
- 6. Different financing use-cases can be distinguished Availability of invoice status information is a key driver to improve financeability of invoices Financier Supplier Buyer 5 6 1 Existing ERP/invoicing solution 6 Improving invoice financing. Douwe Lycklama, Mounaim Cortet 31 October 2014. 息 Innopay BV. All rights reserved. Status Broker 7 Trade 1 2 3 Electronic invoice 4 Invoice approval Finance request 5 Status information broadcast Status information broadcast Existing ERP/invoicing 6 Receivables Finance Model Finance Exchange Status Aggregator 5 solution 7 Pre-payment (deal closure) 6 4 Four-corner model 1 2 3 1 Acceptance Existing ERP/invoicing solution Existing ERP/invoicing solution 2
- 7. Customer journey from a supplier perspective Enabling a One-Click Finance experience 7 Improving invoice financing. Douwe Lycklama, Mounaim Cortet 31 October 2014. 息 Innopay BV. All rights reserved.
- 8. Relevant stakeholders recognize the potential of this model for easier SME financing Interviews executed so far Next interviews Banks Buyers Platform providers Industry organizations Platform providers 8 Improving invoice financing. Douwe Lycklama, Mounaim Cortet 31 October 2014. 息 Innopay BV. All rights reserved. ERP/Accounting software E-invoicing service providers Factoring companies
- 9. What do you think? Key discussion points 1. What invoice status information should be standardized to improve the financeability of receivable invoices? 2. What risks are reduced by this invoice status information (fraud, dillution, counter party, ...)? 3. Is there financial value and for which parties? 4. What are the main challenges of the long-term model? 5. ... 9 Improving invoice financing. Douwe Lycklama, Mounaim Cortet 31 October 2014. 息 Innopay BV. All rights reserved.
- 10. tomorrows transactions today Thank you For your attention Douwe Lycklama, douwe.lycklama@innopay.com, +31 6 557 111 50 Mounaim Cortet, mounaim.cortet@innopay.com, +31 6 417 686 51