Case Studies

We provide IT services to a large corporate client, which pays their invoices on a 60-day cycle. That’s a bit of a challenge for us because we have bills to pay on the 20^th of each month.

We have just the one customer on contract, which makes us highly dependent on them for our cashflow. A big unknown is that, with any billing cycle, the client can sometimes stretch payment out to 60 or 90 days without notice. Having Interface Financial services to back us up provides us with a great sense of security.

I have some experience with factoring companies and know they can be useful.

We did our research. I contacted four factoring companies and spread-sheeted the pros and cons of each. Some discount invoicing companies will charge you a substantial upfront administration fee, while others have fairly stiff percentage penalties if your client pays late. Others were expensive even if you need the money advanced by just a fortnight. Some don’t want to deal with extremely small companies.

Interface Financial came out on top in terms of fitting with our needs.

Interface Financial have a graduated percentage factor. If the debtor pays up within a fortnight of your advance, the fee is just four percent. The longer you go, for example, six weeks you pay more.

I like the fact that their graduated percentage factor makes them so flexible.

Jan Wilson, who looks after us from Interface Financial, is very personable and accessible. Once my wife strikes the invoice and it is approved by our client – usually within a day or two of sending the invoice – we let Jan know and it’s all taken care of.

If we find ourselves with an unexpected bill for some reason, or a tax deadline to meet, Jan will advance us what we need, with the balance paid to us on the 20^th.

I absolutely would recommend Interface Financial to others and have already done so. It may not be for everybody but it certainly works for us.

1.    What was the challenge you wanted to overcome?

I needed to work on the fluidity of the budget because I wanted to concentrate on the work instead of worrying about the money. I wanted to be able to take care of the work that needs to be done, with the peace of mind that I have a cash flow buffer in the background.

2.    Why did you have this challenge?

We’re a growing business, so we’re hiring additional staff and we have lots of work ahead of us. When you’re a growing company, the money goes out faster than it comes in and if you don’t have enough capital behind you, it can be difficult to scale.

3.    What did you try to do first, before talking to Interface, to overcome this challenge?

I tried to tighten the spending and reduce costs while squeezing through more work in the time frames we had. But the nature of how work turns up – with sometime delays due to factors outside of our control – means the best of plans don’t always work out the way you want them.

4.    Were there any initial obstacles that delayed you engaging Interface? If so, what were they?

We have many different clients, but we did need to have at least one fairly significant key account which would enable us to put through an advance on certain invoices. We needed to satisfy Interface that we have a reliable business base.

5.    What did Interface do to help you overcome this challenge?

Interface sat down with us and chatted about our clients, including who would be the most reliable to approach – the ones who had the credentials to partner with us and Interface Financial. So, they actually helped me get my clients on-board in a way that the client remained comfortable with the process.

6.    What has been the result or outcome for your business?

I can now concentrate on the work. I worry less about the cash budgeting, knowing that even when it gets tight you don’t have to worry about whether or not the money will turn up. It has smoothed out the worries, especially when we’re trying to expand.

7.    Would you recommend Interface to other people? If so, why?

Yes. Working with Interface takes the worry out of the business and lets me keep my mind on future growth and expansion, rather than worrying about how to keep things turning over.

IFG Wellington recently worked with a construction business that in the past undertook work in the domestic market and as a result received payment as and when the work was completed. Cash flow had therefore never been a significant issue.

However to provide diversity and a greater level of continuity of work, they recently secured additional new contracts for building and maintenance of commercial properties. In terms of standard business practice they complete the work involved on the properties, issue their invoice and wait for payment from the companies involved.

While payment of the invoices is relatively assured, the delay in receiving payment was creating cash flow issues for the business.

Their Bank was not able to provide any further credit to the group so referred the business to IFG Wellington who worked with the business to establish the invoice discounting Facility.

As and when required, the business has subsequently been able to quickly turn some of their outstanding commercial invoices into the cash they need to manage and grow their business without adversely impacting on their new commercial business relationships.

In early January 2017 IFG Auckland was approached by a Building Contractor who is currently working on a residential housing development in South Auckland.

The Contractor was expecting payment for their pre-Christmas completed work to be received in the first week of January but was advised by the Developer that due to staff being away on holiday the payment would not be made until the second week of January. The Contractor was faced with a temporary cash shortfall and the prospect of not being able to pay staff wages during the holiday period.

Interface completed their due diligence and had in place an invoice discounting facility within 48 hours which enabled the Building Contractor to pay the all-important holiday wages to their staff.

A long standing Interface client that finds Interface more convenient than a bank overdraft!

Their largest customer is a significant trucking operator requiring up to 20 jobs each month to keep the fleet on the road.

Interface purchases all the invoices to this one customer only. "We just do not have to worry about our fortnightly payroll; we get David the invoices one day and the funds are in our account the following morning. The small fee involved is well worth it for the peace of mind alone."

A major wind storm opened up the opportunity for this client to triple their production. A huge number of trees were blown down and damaged late in April 2012. The owner needed them harvested very quickly.

The contractor was keen, but unable to fund the huge increase in wages and fuel to make this happen. However the opportunity was too good to turn away. The contractor's bank suggested Interface as a solution.

It fitted the business model ideally - helping an operator prosper through an over trading situation. Invoices were generated weekly, funded by Interface the following day and payments received 3 weeks later. Without this help the contractor just could not have taken this work on.

Customer default causes downstream cashflow stress!

A significant customer not paying for work done placed this particular business in real difficulty - all the expenses had been paid with no income offset.

There was more good work in the pipeline, but inadequate working capital to fund it.

Interface stepped in to fund the new work as soon as the invoices were delivered. This enabled materials and labour expenses to be paid on time and helped get the company back on its feet. This type of short term assistance is core Interface activity.

The new Ultra Fast Broadband project driven by Chorus has provided months of excellent ongoing work for sub contractors in that space.

This customer has excellent credentials and expertise, but is very under-funded. The customer of course is excellent. Payment is not a concern, only when! The contractor's bank was not happy to get involved due to several prior IRD defaults (now remedied).

They were referred to Interface by a fellow contractor (a previous client). As fortnightly work was done and claimed, Interface funded these claims to allow materials providers to be paid on time.

This West Coast business has moved into Christchurch to be part of the rebuild.

It very quickly became apparent that they lacked the working capital to fund their expenses until EQC payments started to flow. Their bank suggested Interface get involved and provided a temporary facility until the first invoice/claim was issued.

From that point Interface took over - cleared the bank and funded the ongoing work as it was completed.

It is expected this type of need will grow quickly over coming months as the Christchurch rebuild gets moving.

This small firm suffers from the perception that all accountants are rich and consequently get paid last. They have bills to pay like any other business.

Where clients need extended credit terms they now add a finance charge and have Interface purchase those invoices. In this way the client needing the extended credit is effectively paying the IFG fee.

This is a neat way of making the Interface solution work at almost zero cost.

This company has been importing a range of products and spare parts from Italy for several years.

Improved conditions flowing from the high Kiwi dollar have been offset by customers requiring longer payment terms - up to 60 days. This has made it very difficult to place overseas orders when required to meet customer demand.

Interface has helped by purchasing the invoices of two major customers to ensure the business can adapt to the new payment terms. "George Rota has been a huge help to us by taking the stress out of the situation, while still allowing us to remain competitive," explains MM the company owner.