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TSS | Case study Facevalue: Retail

The retail industry has experienced shrinking margins and Buyers have been demanding longer trade terms. Facevalue’s German client produces consumable food products and has devised a diversification strategy to include organic and sustainable products, which it promotes to its existing as well as new customers which largely consist of large European retailer groups.

WCAP requirement

Our client has had to invest in new packaging, labelling, shipping and warehousing in order to bring the new product line to market. The introduction of a new product places more stress on working capital due to the initial investment and payment terms of retailers. The new product line showed early signs of success with repeat and incrementally larger purchase orders from large retail chains. Increasing production and holding more inventory in order to meet demand on tight delivery schedules only increases the need for working capital in the short-term before there is a return on investment and normality in available liquidity. Shareholder funding was not available and traditional lenders demanded a long term contract, excessive security and fees whilst offering 65% of the capital required.

How we solved the requirement

Our client approached us by first testing whether its Buyers qualified to sell outstanding accounts receivables to. We assessed the last three years historical trade data to form an opinion as to how reliable the Supplier is and whether its customers pay on time and in full. We then screened the most important Buyers that it had been trading with as well as new clients. Within a day, we were able to confirm to our client that indeed his customers qualify. The owner / operator signed up to our service online and created his personal user profile and then carried on the create his business’ profile. All confidential data is shared via the secure portal and assessed within our strict controls. Due to the high volume and frequent delivery and invoicing in the retail industry, automated extraction of invoice data is required. Once all the technical specifications were collated, we were able to integrate into our client’s systems and extract invoice data automatically and list the invoices in the client’s secure Facevalue online environment in its Accounts Receivable Ledger, where it can indicate which receivables it would like to sell. While we were busy with the integration, our client was able to upload invoices manually using its Facevalue credentials. Facevalue converts the invoice data to its native format and lists the invoices as if they were extracted via an integration. Facevalue performed a credit and compliance assessment of our client and all his customers. We then offered the trade pairs to our Investors and the first one to confirm credit appetite was awarded the trade enabling us to mark the Receivables withe the status “Eligible” in our client’s Accounts Receivable Ledger. Each trade-pair is credit scored relative to one another based on the parties’ credit strength and historical trade. Credit pricing accurately predicts default probabilities representing the actual risk, which leads to lower cost of finance.

Impact of our solution

In most regions (with the exception of the Netherlands) there is no requirement to inform customers that they have signed up to an invoice discounting service, or that the receivables are assigned. Our solution includes a Settlement and Clearing Account, which is opened in the name of our Bank partner, but for the dedicated use of each Supplier where they receive all payments. We match and reconcile all our client’s accounts receivables, purchase orders and payments daily. Our solution enabled our client to commit to trade relationships with extended payment terms thereby winning crucial new business relationships and growing its fledgling business line rapidly. The supplier took advantage of the financial strength of our client’s buyers and its own strong track record of satisfying its customers with consistency and regularity. Our client was rewarded for its many years of solid performance and with our solution was able to offer select buyers additional extended trade terms in return for committed monthly volume as per a new supply agreement, whilst receiving payments through the platform on traded receivables upfront. The business scaled significantly with these changes in a way that was previously not possible without diluting shareholders, costing more and taking longer. Our solution supports scale and reduced management time through automation and efficiency.

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