IFD Newsletter – Issue 2 May 2009

Brendan Green, IFD Chairman asks if this is the golden era for receivables finance?

Our first ID newsletter was well received by our members. About 50% of them opened the newsletter and 62% of those clicked on the various links to read the range of articles in the newsletter. Thanks for your support.

Hopefully you can forward this one to your clients if you believe there is interesting information you would like to share with them.

Could this be the golden era for receivables finance? Time will tell but the signs are quite compelling.

In the UK and Ireland, more and more businesses are looking to, what they call over there, asset based finance. According to our sister organization, ABFA in the UK, asset based finance is now the first port of call for many companies looking for funding.

Back home, 6,000 businesses nationally transacted $17.9 billion of turnover through IFD members in last three months of 2008. In fact, the turnover in the December quarter exceeds the entire annual turnover for the receivables finance industry in 2002. 

The rapid growth of the industry has been driven by a variety of elements including lengthening debtors’ days, difficulty accessing credit and an increase in the number of medium-to-large corporations with annual turnovers of $250 million and more using this form of finance.

Some stuff you didn’t know about John Bills…

What was your first job and what other roles have you held over your working career?
My first job was in a shoe shop at Hurstville in my school holidays as a 13 year old-I got confused about my age. I had other jobs over the next few years-brickies labourer, barman, where I think I learnt more than I was learning at university. I taught Economics for a couple of years, & started at the Australian Finance Conference in 1975, either a brave move or a stupid one, given the recession at that time. Since then I’ve also been involved with the Australian Equipment Lessors Association, the Australian Fleet Lessors Association, & of course the IFD.

When did you first start working with the IFD?
Right from the start. Peter Case from AGC brought this other person around for a meeting to discuss running the IFD-the other person was someone called Clive Isenberg. The first meeting of IFD was on 19 September 1994. There were 6 inaugural members-AGC (Peter), Scottish Pacific (Clive), Cash Resources (Marcel Kaye), Heller (Geoff Harper), Howard Finance (Alan Maudsley), National Australia Bank (Ken Mann); Nationwide Factors (Bob Ada) joined shortly afterwards.

What would be your lasting memory of the IFD?
My lasting memory will undoubtedly be of all the characters the IFD has introduced me to over the 15 years, right from those attending that first meeting. I still see a lot of them. There’s also the memory of the IFD at different stages of its development, from 6 members in 1994 to 30 plus today.

What’s your worst hit send moment on IFD matters?
From day one with IFD I have been assisted by Connie Sison, & she is actually the one that sends the ‘official’ emails to members, & has protected me from my own stupidity. She has become very well known as a key part of IFD, a bit of a favourite with members-I think a few of them have offered her job as a matter of fact!! 

What one or two insights has your work with the IFD given you over the years?
A very interesting insight has been the contrast between those members who own or are substantial shareholders of their business, as opposed to those that work for a financial institution. The IFD is the only association that has given me that contrast, & it has been not only insightful, but pretty entertaining at times. 

Who stands out as the biggest character in the factoring and discounting world?
Would have to be Clive Isenberg, both for obvious reasons & not so obvious. The not so obvious is that I think I’ve had a working relationship with Clive which is a bit different to most-he has a great sense of humour, at least I took it as humour! He was the one that educated me on factoring & discounting, & it would be hard to do much better than that.  Another person that has been really helpful to me, & to the IFD is Gary Mills-Gary would always volunteer to do things, & always do them very well. There have been plenty of other characters over the 15 years-that’s one thing I have definitely learnt, there’s no shortage of personalities in the Industry. I’ve found the Industry is a bit like the Hotel California, in that you can check out but you can never leave-a person will leave one company & inevitably turn up at another. And everybody in the Industry is a zealot for factoring & discounting-they absolutely love the product & the business.

What’s your favourite IFD moment? And your worst?
My favourite was the Annual Luncheon last year.  We had more than 170 people attending, & it was addressed by the Commonwealth Attorney General, Robert McClelland. He spoke on the Personal Property Securities reform, which is an important new law for factors & discounters. That event brought a lot of things together for the IFD-big attendance from members, the statistics, the ability to get the Attorney to address us, & a significant issue for members, together with the IFD Student Awards. And the worst-well not the worst, but that first meeting back in 1994 certainly underlined the challenges ahead-let’s just say that there was some way to go in getting fierce competitors & strong personalities to feel comfortable in each others company!

What’s your funniest IFD moment?
That first meeting was pretty funny, as were many of the early ones. There are plenty of funny moments, as people in the Industry tend to be a bit irreverent, perhaps more than a bit!

What is your finest Australian sporting moment?
When Alan Border took over a demoralized & failing cricket team & turned it into world champions, ably assisted by Bob Simpson-& I’m not even a big cricket fan. And a couple of Rugby World Cups, which I really like to bring up with the New Zealand members of IFD.

Which teams to do you support in which codes?
The Waratahs in Rugby, & in League anybody but Manly.

Who is your favourite movie star and what is your all time favourite movie?
Anthony Hopkins and probably Catch 22, which is also a great book.

Where to from here for John Bills?
For the IFD, bedding down the PPS reforms is a big priority. I thoroughly enjoy my work & the people I work with, & I’m looking forward to continuing that. On a personal level, my kids are now adults and my wife and I are enjoying a new stage of our relationship with them-now it’s our turn to be irresponsible! A bit more time for pursuing my own interests and perhaps even getting fit.  And I’m really looking forward to the sharemarket recovering.

Debtor Finance Index

Click here to see the latest Debtor Finance report: June 2009 (PDF: 670kb)

Factoring and Discounting course attendance reaches 250 mark

In the four years from 2005 to 2008 a total of 246 people have attended the IFD course run by the Australian Institute of Credit Management (AICM) 201 were members and 45 were non-members. The average attendance at courses is running at 11.5.

Find out about the next IFD courses and our new online course

• The IFD training course Factoring and Discounting in Australia conducted in conjunction with the AICM ran in Melbourne in early March and in Brisbane in April. It will next run in Sydney on 25/26 June 2009.

• The online course Introduction to Factoring and Discounting costs only $115 for IFD members and is run in conjunction with the Australian Institute of Credit Management and you can register online via the AICM at www.aicm.com.au

• Bookings for the New Zealand course starting on 15 May are open. This course has been tailored for the New Zealand market and is run in conjunction with the Australian Institute of Credit Management.  Unfortunately only one person registered last year and if there are insufficient enrolments this year it is unlikely the AICM will be able to offer this course again in New Zealand. Members are therefore encouraged to send staff along to the course by enrolling online at www.aicm.com.au

IFD Student of the Year

At the annual general meeting held in Melbourne on 26 March, chairman of the IFD presented the IFD Student of the Year Award to Lyna Sao of Oxford Funding. Every year an IFD Student of the Year is selected based on course work and written assignments.

Green pointed out that the quality of the student assessments was so high this time around that the IFD wanted to recognize the other two finalists and presented them with an award for “Outstanding Achievement”.

These awards went to Gary Shaw of Scottish Pacific Benchmark, and for the first time an Outstanding Achievement award went to someone outside the industry. The other recipient was Cheryl Moore from Jemena Ltd, a new company formed from the union of Alinta and Singapore Power, which manages over $8billion of gas and electricity assets.

On presenting the award to Jemena, Green said: “This is a very pleasing outcome, and in a way signifies the growth in the awareness and status of receivables finance within the Australian financial system.”

During the award ceremony, Green outlined how the IFD had, in 2005, embarked on an ambitious program to establish training courses on factoring and discounting in conjunction with the Australian Institute of Credit Management (AICM).

The IFD members themselves contributed to writing the course materials and now the course can now be taken as a discreet two day face-to-face program offered by AICM, online, or part of the accreditation for the Diploma of Financial Services.

The on-line Introductory Course now being offered by the AICM is ideal for new employees at all levels, and is a good building block for the two-day course.

Recent IFD press coverage

http://www.businessday.com.au/business/receivables-finance-booms-amid-the-bust-20081114-6781.html

http://www.nbr.co.nz/article/businesses-fear-post-christmas-hangover-receiverships-soar-38500

http://www.miningnews.net/storyview.asp?storyid=560813

http://www.moneymanagement.com.au/article/Business-Planning-Varying-the-financing-mix/468812.aspx

http://www.smartcompany.com.au/Free-Articles/The-Briefing/20090226-Debtor-financing-surges-as-cash-gets-tight.html

Opinion piece from Rob Lamers, CEO of Oxford Funding 

Factors and frauds
                                                            
While tougher economic times have historically been a boon for the debtor finance industry, Rob Lamers, CEO of Oxford Funding cautions of a new risk emerging – an increase in fraudulent activities.

Many businesses in Australia are starting to feel the pain of the slowing economy. With sales reducing, trade payment days blowing out, and access to credit becoming increasingly difficult, more businesses than ever are seeking assistance to better manage their cash flow.

To combat their cash flow pains, a record number of small and medium businesses are turning to Debtor Finance to fund growth. This is highlighted by the recent figures released by the Institute of Factors and Discounters (IFD), showing total turnover for our industry climbing to a record $65 billion, up 18% from the previous year. Within 3 years, our industry can expect to turnover $100 billion pa.

Traditionally, tougher economic conditions are a boon for our industry but we are not immune to the economic fallout.  This fallout brings with it higher risks, as businesses short of cash are increasingly using fraudulent invoices to raise badly needed funds and hold off the implications of the credit crisis.

By sending non-existent invoices with genuine ones, businesses seek to gain ‘breathing space’ and whilst they intend it to be a short term strategy to alleviate cash flow issues, unfortunately it is usually the beginning of a downhill spiral and in the end they are found out.

What as an industry can we do to combat this rise in fraudulent activity?

Today, more than ever, it is prudent to ensure you adhere to or even step up your internal risk procedures to ensure the debt you take on is enforceable.  Too often in hindsight you realise if only you had followed your procedures and not taken shortcuts in the face of competition or customer pressure, the outcomes would have been very different.

Detection can be as simple as telephoning the debtor and verifying that an invoice is correct, or obtaining a copy of supporting documentation such as a signed proof of delivery and a copy of the purchase order. In some cases further prevention techniques may also be introduced such as more stringent verifications, or rigorous reconciliations and on-site audits. Knowing your customer has never been more crucial.

Faced with the fact that even the most stringent of risk management policies can be deceived, we as an industry need to continue to work together, remain even more vigilant, and whenever possible, alert each other about fraudulent activities.

A staggering 80 per cent of bank’s bad debts emanate from a refinance. So encouraging a customer that has committed fraud to refinance to another IFD member will harm us all in the long run and damage the reputation of our industry.

The International Factoring Association hosts an online Fraud Forum, which is a secure online meeting place where factoring companies can go to warn others about fraudulent activities. The forum is intended to be the first reference point where factors can go before they book a new customer to see if other factors have had any negative experiences with the company or individual.

I propose a similar model for our industry, which may be sponsored by the IFD.

We could all use this forum to learn from each other’s experiences. Many of us have been exposed to the fraud stories over the years and we know that some directors will go to extraordinary lengths to protect their businesses. External pressures on directors can cause them to create elaborate schemes, and they are becoming more sophisticated.

As an alternative to the forum, we should seek open and honest references from fellow IFD members to ensure any breach of agreement by the client is disclosed to the prospective financier before settlement.

We would, however, need to be cognizant of privacy issues for both options.

While this may pose some conflict, we should be acting in the best interests of our industry.