PracticeConsultingFactoring – Factoring nets business from the web.

Factoring - Factoring nets business from the web.

The web has provided a boost to many businesses. Factoring, says

For all the grand claims of the e-revolution, the internet has delivered a ready and accessible source of information for its customers.

Web-based access to a sales ledger handed over to a factoring house is one area where the internet can give businesses a huge boost in confidence as they plan for the future and look for a ready measure of its accounts at its finger tips.

Online factoring up until this year was largely confined to glorified sales promotion by the publicity savvy invoice and factoring sector – but the year 2000 has seen the big houses rush to fully deliver their products on the web.

The benefits are huge for businesses – with an instant access to accounts at any time of day, or day of the week, particularly useful for small to medium-sized enterprises whose needs are not always confined to a nine to five working day.

And online services are suited to factoring and invoice finance, which allows customers to unlock their sales ledger, release working capital and generate a cashflow driven from current and future sales performance.

Head of asset finance at HSBC, Steve Bottomley, says: ‘The internet and e-commerce is without doubt the biggest change that has faced system accounts for the last decade – and it will have a significant impact on the relationship and perception customers have of factoring and invoice finance.’

HSBC last month launched Ledgerline, which provides customers with PC operating web browser software its full invoice finance services online, as well as business information on subjects such as commercial legislation and best practice.

Bottomley says: ‘Time and resources are key to the success of any business and we are sure that the enhanced service available via the internet will assist growing businesses.’

Research conducted for HSBC’s asset finance division earlier this year on business in the 21st century found nine out of 10 businesses are now using the internet, with even more set to go online.

Bottomley says: ‘Making our services available online is a natural extension of the means by which our clients do business with us.’

And for a global outfit like HSBC, with around some 6,000 offices in 81 countries and valued at $580bn (#362.5bn), the worldwide reach of the internet can speed up transactions that could otherwise take days and weeks to seal.

‘It’s such a swift and simple process,’ enthuses Bottomley. ‘You just enter a password and are straight onto a website within nine seconds – which means our customers can access their own financial information at their own leisure rather than be governed by us.’

HSBC, like its competitors, last year saw a spate of new applications and a rising tide of businesses and customers migrate online – and responded by fast tracking its internet strategy.

‘The shift online in the marketplace persuaded us that we had to take the leap and act quickly to provide our customers with a web-based product,’ Bottomley says.

And the internet can only boost the sector’s steady expansion and move towards respectability in the eyes of businesses who once viewed the financing alternative as a last resort for failing and bankrupt businesses.

The Factors and Discounters Association estimate that its members annual turnover climbed 13% last year to more than #64bn; while an HSBC Invoice Finance survey this year of more than 4,700 UK companies found that businesses choosing factoring could grow from 10.8% now to 23% over the next five years.

Some opt for full factoring services, which involve the handover of a company’s sales ledger, others prefer invoice discounting because they want to retain their sales ledger.

Factoring companies buy your trade debtors and pay a percentage, usually in the region of 80% to 85%, of the approved debts as soon as they receive an invoice.

There are more than 60 invoice finance and factoring houses in the UK – all of whom at least offer promotional information online with some like Bibby already offering an online website with provisional quotes others are in the process of setting up their services via the web.

John Jenkins, business development director for both Lloyds TSB Commercial Finance and Alex Lawrie Factors, agrees that the internet has allowed the industry to communicate more effectively with its clients who often need to access information or a factoring product swiftly.

‘Electronic information allows our customers to see what their accounts look without having to wait for offices to open or people to be at the other end of the telephone,’ he says.

‘The internet has been taken up by ourselves and across the industry, because it allows us to provide our service more efficiently and cut its cost to our customers.

However, Jenkins points out that there is still a significant minority of businesses and clients who are yet to have access to the internet – and that some of the smaller businesses using invoice finance and factoring products don’t even possess computers.

‘About 20% of our clients are yet to hook up online,’ he says. ‘And some of the very small businesses – such as one man shows – still don’t even use computers and still draw up their accounts on paper.’

Alex Lawrie launched its products online 18 months ago, and according to Jenkins has now reached an 80% market penetration for its factoring services, with a slightly bigger uptake for its online invoice finance packages favoured by larger small to medium-sized businesses.

‘There has been some suspicion and resistance among some of our clients about the internet,’ he explains. ‘The integrity of data and concerns about who will be using sensitive information and for what is still an issue among some businesses – which is odd if you think that people have quite happily over the last 150 years put confidential documents in the letter box and through the post.’

Jenkins believes there will be a boom in the uptake of online factoring and invoice finance services over the next year as businesses become used to the electronic data interchange (EDI) , such as the exchange of trading documents and invoices on the web.

‘There is still a big security issue hindering the use of the internet to send invoices, but it is largely a matter of perception that will give as people become more confident about using the internet for everyday transactions and the technology is further developed to protect their information.’

Ted Ettershank, managing director of Lloyds TSB Commercial Finance, adds: ‘Our e-commerce platforms are already being used by 1,000 SMEs. By the end of next year, we will have extended this service to all our clients.

‘Work is also underway to be the first in the UK to allow prospective clients to apply and be approved online for our factoring service. In view of these developments a global, fully online cashflow service for SMEs cannot be far away!’

Lloyds TSB has also joined forces with international finance software provider HPD Software Ltd to develop a new software system for the secured asset finance industry.

‘I think factoring and the internet go well together, because an integral part of our product is that it is global and it brings the buyer and seller integrally together,’ Bottomley adds.

‘You can have a manufacturer in Singapore or India with a part needed in the UK, and the internet allows that process to occur even more swiftly.’ SERVICES FROM ALEX LAWRIE FACTORS

E-start, an electronic service for factoring clients, aims to reduce the time it takes to become a factoring customer from 10 days to one hour.

E-start involves the electronic transfer of the clients sales ledger over to Alex Lawrie and works with all standard accounting packages and non-standard packages with a reporting element.

Alex Lawrie also plan an electronic online application system for factoring that will offer a fully underwritten quote, which means that if a customer decides they want to factor the next day they can. CashConnect was launched last year and is an online stripped-down alternative of the conventional factoring package as opposed to an adjunct. About 10% of Alex Lawrie’s customers use this service at the moment. The company is currently working on an internet-based support package for its traditional factoring package.


Bristol-based engineers Connexion Developments import specialist safety fluid and gas valves for customers across industry who need replacements to arrive swiftly and to order to ensure the smooth running of their machinery.

Founder Michael Freye cites the example of a last minute order for an overnight delivery that needs to arrive in Falmouth before a ship can set sail the next morning.

Freye imports solenoid valves from around the world, mainly from the Far East and Europe, and then distributes to a wide range of customers in the UK from nuclear power stations through to domestic appliances, they play a crucial part in the safe and smooth running of machinery.

Fitting the right solenoid valve is crucial and Connexion provides not only the valve but also the technical advice to go with it.

Part of the smooth running of the business is down to the relationship that the company has built up with HSBC Invoice Finance and its online services.

Freye says: ‘By financing and protecting our debts online, we don’t have to worry about our cashflow and getting paid. If we did have to deal with that, we would have to charge more. But this gives us a winning edge.’ Connexion has had just one debt since it started trading, and that was dealt with by HSBC. If an order comes through from a customer with whom Connexion hasn’t dealt before, Freye either goes ahead if the order is under #1,000 – or contact HSBC for an OK.

Access to 75% of the invoice value straightaway, gives Connexion the opportunity to avoid working capital constraints that many fast-growing businesses face on a daily basis. When Connexion needs to buy in stock, it knows it has the means to settle the account when it falls due.

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