Almost half a million SMEs in Australia have cited a lack of finance as the leading inhibitor to grow and innovate. With the structural shifts in the greater finance landscape there are many opportunities for fintech startups to update traditional products and provide more competitive access to capital and finances.
A common term used by new startups in the fintech space is transparency. What these startups aim to bring to the market is a total transparent relationship with their clients to help businesses manage and optimise their cash flow. In the last decade the invoice finance industry in Australia has grown significantly, with total invoice volume increasing from $36 billion to $65 billion since 2005.
Until recently, however, invoice transactions have largely been offline, providing investors with limited access to invest and high costs of service fees. Lately, however, newer businesses working in the finance invoice space like MYOB, Xero, Hocho and Invoice2Go have been innovating to provide businesses with opportunities to make more informed and educated decisions when it comes to finance.
Launching to offer a complimentary service to the invoice finance marketplace is Sydney startup Skippr. The finance platform wants to empower SMEs to better understand their cash flow by connecting invoice finance with cash flow forecasting.
Pat Crivelli, Founder of Skippr said, “SMEs are the backbone of our economy, but nearly half will fail as a result of poor cash flow. Empowering SMEs to take control of their finances means more competition, innovation, productivity and growth for Australian businesses.”
SMEs sign up to Skippr for free and are given access to a cash flow forecasting tool, which they can integrate with their online accounting software. From there an understanding of their cash flow position and what their cash flow challenges are can be made with the aim of influencing their invoice payments.
SMEs can choose to sell their invoices to investors based upon three key assessments provided by the platform – financial (credit) risk, invoice verification and predictive analytics. Invoices are priced according to these assessments and based on a higher level of transparency theses fees are more cost efficient.
Skippr’s payment model is generated by assessing a business’s risk profile and looking at the types of customers they are selling their invoices to. A fee is collected from the borrower – the SME – and the investor who buys the invoice. For example, if a business was to unlock funding against a 60 day invoice then that business would pay on average between 1.5 and 2.5 percent.
“Instead of waiting 50 days to get paid, an SME can select and sell invoices to provide a cash injection. The cash flow forecasting tool helps them get foresight of these funding needs via a simple online dashboard,” explained Crivelli.
Through cash flow forecasting Skippr can help businesses identify where they are likely to run low on cash. With insights and transparency businesses can determine how accelerating invoice payments from customers can help them avoid cash crunches.
More importantly this means businesses can improve their cash flow without taking on debt. Clarity and understanding of cash flow drivers are critical to creating a smooth cash flow cycle.
Alistair Lamond, cofounder of Skippr, believes their approach to invoice finance has the opportunity to offer businesses more flexibility and control.
“Alternative lenders like ourselves, alternative invoice finance firms like ourselves, have the opportunity not only to disrupt the traditional players, which perhaps are using more dated methods to deliver their products, but also, given our technology we’re going to have much more capability to activate a lot of new businesses that have never used invoice finance before,” he said.
The Skippr platform aims to support fast growing B2B SMEs that fits into a model of a typical fast growing company with large end-customers. Lamond explained these target companies are dealing with debtors and businesses that have over $500,000 in revenue. With a fast growth starting point, Skippr aims to help grow these businesses that have long been inhibited by long payment terms.
Australia’s finance invoice market is largely untapped compared to the world’s number one fintech market, the UK. Australia’s invoice market makes up only five percent of GDP, while in the UK the market makes up 15 percent. With this space still being an underutilised form of finance in the SME market, Australian startups like Skippr have an enormous opportunity to tap into.
Currently in Australia we have seen new startups emerging to offer solutions and advice to SMEs on where to source debt, equity, and how to take control of their cash flow. Recently Sydney fintech Neu.Capital established itself as the first global marketplace for mid-market companies to source alternative capital. The startup opens companies to a wide range of investment offers from Australian and overseas investors.
Last year startup InvoiceBid, which has recently changed name to Timelio launched its invoice platform to change the way SMEs get a better deal. Acknowledging the tough process for SMEs to gain cashflow, Timelio offers a platform where businesses have their invoices funded by investors through a bidding system. This gives businesses access to working capital immediately, instead of waiting up to 120 days for their invoice to be paid by a debtor.
The Timelio platform works for businesses who have invoices with a minimum value of $10,000 and have helped businesses with over $20 million in turn-over. It’s market is essentially the same, working with many businesses on the smaller scale. Both Timelio and Skippr have the same initiative- to change a largely unchanged banking and finance industry through smart technology and fast connections between businesses and investors.
The evolution of fintech is driving a cultural shift where, equity, debt and funding is being sourced from alternative businesses, rather than the big banks. This cultural shift driven by a demand for financial transparency and flexibility.
Having launched in January, Skippr has raised $190,000 in seed funding, backed by three unnamed angel investors. The startup is currently working out of the Tyro Fintech Hub in Sydney and aims to focus on the opportunity in the Australian market before looking to New Zealand.
Lamond said, “I’d say the first market we’d look at expanding the product to would be New Zealand, because while it’s smaller, it’s a very similar economy to Australia. We see there’s a lot of upside opportunity in the Australian market at the moment so that’s what we’re focusing on.”
Image: Alistair Lamond and Patrick Crivelli. Source: Supplied