Business Money – Finance and Banking for Business

The client comes first - at last

March 2005

The market is moving...the clever ones are moving with it

Andrew Stoneman

As a supplier of corporate restructuring services to the asset-based lending industry, we – at Menzies Corporate Restructuring – were delighted to be asked by Business Money to sponsor the eighth annual receivables review.

Business Money, like us and many of the companies featured in the survey, is not dissimilar in its approach to the UK factoring market. Gone are the days when an organisation could afford to dictate terms, oblivious to or regardless of its clients’ needs – client needs must, and thankfully are, now starting to come ﬁrst. In fact, Business Money, just like the successful and innovative factors in the market today adopts a customer intimate approach. It is not by chance that Bob knows his audience intimately and what they want from a publication – and this is one important reason why we all read it!

In the work we do, we have the privilege of working with the majority of the UK factoring market. We can easily see the difference between the companies that have the ﬂexibility and scope to tailor their products to each client opportunity and those whose company ethos is more rigid. Lavishing attention and ‘cosying up’ is great, but can only be really beneﬁcial if the factor is truly customer intimate. What separates the mighty from the might-bes is pretty simple and straightforward, but rarely available in its entirety, and that is being able to offer clients the ability to smoothly take on a deal, share in the client’s risk and assign top level personnel to the case. Combine this with the newest and ﬁnest techniques available, personalised to best suit an individual client’s circumstances, add a wide range of products to meet client needs and an experienced risk function, and you have the recipe for a successful solution!

However, the real world has been changing and over time we’ve seen many changes in the industry with people and teams swapping places. Margins and deals in our stable economic environment have shrunk and clients have started to dictate terms. What we have seen again is that, when faced with today’s market conditions of pressures on advance and notice rates, and competitors replicating approaches and undercutting prices, clients understandably start to view factoring as a commodity.

Innovating
However, companies taking this approach can rarely sustain success. The successful companies are those that are continuously innovating, bringing in new talent and restructuring so that they can get closer to their clients and their untapped potential. This type of steady progress that is not based on price or other gimmick, allows real, sustained growth in terms of client numbers and seems a fairly fundamental practice of successful players in the market over recent years.

In the same way, successful legal and accountancy advisers to the industry are also having to look at ways of bringing innovation to the services they provide.

Adding value
For instance, providing high level involvement to ensure that each assignment capitalises on the expertise and knowledge of the whole team is inherent to the way we work and is certainly one reason why clients return to us.

Having seen most types of corporate failure does give you a kind of sixth sense when it comes to assessing a business and its management team. This can prove a real strength to clients in the factoring industry. Gone are the days of the business review that is read once and then ﬁled – this can lead to real problems, especially for contractual businesses where funding needs to be actively managed by way of business models linking the sales ledger to daily cash requirements. On bigger transactions, timing and getting involved in the fabric of a business is key, and is an area where experienced advisors, with speciﬁc industry experience, can offer practical help and really add value.

Sharing risk
The process whereby some risk management work is outsourced is being used more and more by companies that want to focus their teams and channel their energies on growing their businesses. So long as the adviser can stay ahead of the competency of the factor, then strategic partnerships in managing certain types of accounts can deliver beneﬁts for both sides. This seems to be a formula for success and we are working closer with our clients and sharing more risk than ever before.

Knowledge about business is becoming more and more specialised and is leading to greater reliance on outside advisers. Factoring IT software, legal reviews of documents and funding of companies with ﬁnancial problems are all areas in which expertise has become deeper and more specialised from advisers that regularly add value to the factoring industry. The new stars will need to grow and adjust and work ever closer with their clients.

We hope you enjoy reading the Business Money review and that you stay ahead of the competition this year. Staying still is not a successful option in today’s business world and clearly if you need some help then don’t hesitate to call us.

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The client comes first - at last