Construction Client Ethically Uses Payables Finance To Improve Supplier Terms

$2m 

  Facility Size

Construction

  Industry

Melbourne

  Location

Facility Details/Solution Used To Achieve Results

Accounts Payable

Supply Chain Finance

Solving Suppliers Liquidity Needs

OVERVIEW

Many suppliers and subbies in the construction industry are feeling the pressures of constrained cashflow, our client recognised this issue and explored various options to try to establish a way of helping their supply chain, without putting additional stress on their own working capital.

The approach the client used was to survey their suppliers and subbies to establish actual needs within their supply chain and if there was significant demand for earlier payment.

A large portion of their subbies were keen to have access to earlier payment, but wanted the option to pick and choose when.

On the other hand, suppliers were typically happy with their terms, but would accept a discount if the client paid invoices immediately, these discounts ranged from 2% – 5%.

While the client was able to establish which suppliers would repeatedly give discounts for early payment, they were unable to identify a consistency when it came to their subbies early payment requirements.

 We wanted to first understand if there was a need for early payments, our accounts payable team had been previously noticing an increased number of requests from subbies for early payment, and research led us to to believe that across our supply chain there was a need for early payment, and that a number of suppliers were using other financial solutions to support their cashflows

The Approach

Fifo Capital provided the client a $2m Supply Chain Finance facility that could support both the suppliers and subbies requirements. They used our priority cloud-based platform to manage early payments, and used the supply chain finance facility to make the early payments.

Key Features

  • The client’s procurement team introduced a simple discount program with suppliers, whereby suppliers would give a “pay me now” price as well as a normal-terms price. Then, if the client wished to have the discount, they uploaded the invoice on to our platform for funding.
  • The supplier discount is significantly more than our cost of finance, meaning a portion of the benefits from the discount is offset against the cost of using the finance.
  • With subbies, the client uses our platform to notify the subbie their invoices are approved giving the subbie the option to be paid on normal terms (100% of what they were expecting) or earlier for a small discount.
  • While the discount is small for the subbie it typically covers our cost of finance, meaning the subbies could remove the portion of debt they currently used to fund their invoices to this client.
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Innovation Leads to Added Benefits

RESULTS

Over 30% of suppliers joined the engaged with the program, seeing it as a positive initiative. All the subbies where added to the program, and where given then ability to select which invoices they wanted early payment for on an ad-hoc basis.

  • Through our platform, the client is able to also extend their terms back to us, they pay a small interest charge each time they do. This helps them better manage capital expenses and manage cash flows with more certainty.
  • Suppliers and subbie discounts are considerably more than our costs, therefore the client can choose to forgo the discount to us in return for a free extension of payment terms.
  • Client has a working capital solution for their business, has built a better reputation with suppliers as a ‘great’ payer, and subbies feel better appreciated, meaning the client has the best trades people on their jobs.

 

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Key Facts

value - $2m Payables Facility Construction Business - VIC
01

Client remains in control of invoice approvals.

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02

Both subbies and suppliers are part of the program

payment - $2m Payables Facility Construction Business - VIC
03

$2m revolving facility supporting the client and their supply chain

Leading the way with non-bank cash flow and working capital finance since 2005

Funding big and small amounts. Simple, Fast and Flexible

We're solutions-focussed. Whether you need fast one-off cash flow solutions or expert thinking to give your business the financial tools for success, we can help.

Integrated solutions for your business needs

Multiple finance options gives you maximum funding

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Fast track cash flow by turning unpaid invoices into cash. A simple way to grow your business and take hold of sales opportunities.

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Imagine local or overseas suppliers being paid COD without security and then you not having to pay for 120+ days. You can with Fifo Capital.

supply finance - $2m Payables Facility Construction Business - VIC

A unique facility which you can use to pay suppliers, and extend terms to us, freeing up working capital to use as and when you need.

imidate cash flow - $2m Payables Facility Construction Business - VIC

Customised to fit your cash flow needs. Sitting alongside existing lending, it is a great way to innovate, grow and stay competitive.

What Some Other Clients Say

Fifo Capital has impacted very positively on cash flow, allowing us to focus on day-to-day running of our business. This, in turn, has allowed us to continuing growing sales. The service is extremely easy to use and no-fuss forms make applying simple.

Packaging Company

Fifo Capital’s efficiency is great – the next day the money was in my account.

Importer and Wholesaler

Fifo Capital are co-operative and nothing is too difficult – I have a very good working relationship with them. They are excellent at what they do, open to ideas, easy to contact and quick to reply.

Home Services Supplier

We were experiencing rapid growth and we needed to process ahead of time to meet demands over our seasonal shutdown period. This creates huge pressure on cash flow which traditional banks have been unwilling to address. Fifo Capital’s invoice discounting has allowed us to keep a positive cash flow and meet the demands of our customers. All our requests have been met with the minimum of fuss and the process is very simple to use. I would happily recommend Fifo Capital

Health Foods and Supplements Business

Being a busy Asphalt/Construction company we were looking for cash flow solutions. Meeting with Dean from the Fifo group and hearing of their services, we knew this was exactly what we were looking for. The meetings and procedures were quick and no hassle with extremely good follow up and excellent contact, each and every month. We are rapt we have made the connection and enjoy the no hassle and positive moves towards the future. We would highly recommend their services to any company.

Construction Company

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