Factoring Accounts Receivables

Is your Accounts Receivable Factoring firm on the path to be able to capitalize on the "unsettling" trends in the current United States economy? This is the first in a series of articles to discuss this important and timely topic.
 
In a prior series of articles, I presented an entire series of articles on ways to better plan and serve your business financial factoring clients. I have decided to shift gears a little bit on this next series of articles away from the functional or "block and tackle" approach to serving your clients [surveys, ongoing monitoring, website designs, etc.] to a more philosophical discussion about what it takes to survive in a rapidly changing financial services environment today. It is important to note at the outset that my perspective is one of an owner in a focused factoring firm that serves clients accross the United States. However, I believe many of the topics presented here can be applied regardless of firm type, [service, manufacturing, distribution, construction, etc.], product menu, and geographic location [Europe, Asia, Australia, Africa and elsewhere].

"Yes there are two paths you can go by but in the long run There's still time to change the road you're on" Stairway to Heaven, Led Zeppelin, released November 8, 1971

The Accounts Receivables Management Environment Today

In a word, unsettled. In the United States, there is not a day that does not go by without some additional development that makes the ability to predict the future nearly impossible, if not challenging. Consider today's lunchtime online Wall Street Journal as a good example [headlines condensed]

-Stocks gained though investors remained concerned about the economic outlook.
- More homeowners are filing for bankruptcy to try to stay in their homes.
- Wal-Mart lowered its forecast for capital spending as it slows store growth over the next few years.
- UPS expects domestic package volume in the fourth quarter to increase at its slowest rate in four years.
- Lexmark to move 1,650 jobs overseas.

With a housing market under apparent siege due to lax lending standards, many of the larger banks and financial service firms in the United States have begun to review and restrict lending to many previously qualified individuals and firms. These uncertain times are, I believe, an opportunity for well run factoring and Accounts Receivable management firms to grow significantly in 2008 and beyond.

Am I/ is my Factoring and AR management firm ready to capitalize on in this environment?

As the brilliant French chemist Louis Pasteur once said, "Luck favors the prepared mind." If we are to take advantage of the current opportunities in the specialized financial services industry, we need to be prepared. How can we make sure that we are?

The steps to determine if we are prepared have been presented in previous articles that have been published on industry leading online sources, such as Factorscan. This process to determine if your invoice factoring and Accounts Receivable management firm is prepared starts with the development of a Vision, using a three step process:
- Define the vision for you
- Develop an "identity" for your financial services enterprise
- Then communicate the Vision and Identity to key stakeholders of your enterprise.
 
In these prior articles, I challenged all of the firms in our specialized financial services industry to ask and answer the questions listed below. This will ensure that your firm has made the important migration from a product focused [dinosaur] to an information focused firm. Here is a series of questions to think about:

1. Is your factoring client expectation still driven by advertising, features and benefits, or is the focus centered on information intensive, personalized, super responsive approach?
2. Do you even know how your Accounts Receivable firm is perceived by your clients? Has there ever been a formal, objective survey process for new and existing clients? 
3. Are you still focused on meeting your working capital, cash flow and invoice factoring clients expectations based on location of your facilities, pricing and delivery?
4. Is your firm truly focused on a client relationship management approach? Or are you still of the mindset that if "we make it, they will buy it?"
5. What is your cash flow and factoring company strategy, with respect to your products and advertising? Have you explored, embraced, and exploited the Internet as a tool to offset the disintermediation occurring within the more traditional financial service providers that your clients previously used?
6. Do you still consider your MIS function to be "transaction" oriented only, vs. a CRM tool and a source of valuable data to analyze? Is there a focus on efficiency or effectiveness relative to serving factoring clients?

It is clear to me that only the Client driven business financial factoring and Accounts Receivable management organization will be in a position to grow and excel in the environment we see on the horizon. Recall that the Client driven organization marries a well thought out strategy with an aggressive operating plan, supported by a team of focused professionals. The truly Client driven organization uses a marketing plan that combines client and business intelligence, real time knowledge transfer, integrated communications in the execution process, a branded marketing approach and an online, interactive approach to development and integration.

Practical, then Philosophical Steps to Take in Cash Flow Funding and Invoice Factoring

Once the practical questions have been asked, answered and addressed, the more interesting part of this exercise is to determine if your cash flow funding and working capital firm is philosophically ready to serve clients in the current quick changing environment.  Many of the ideas presented here are based on an excellent text dealing with Mentoring, by Al Huang and Jerry Lynch.  There are nearly an unlimited number of books out in the market dealing with these concepts but I have personally found this 1995 effort to be one of the best ever written.

How can I as an owner/manager/principal of a financial services firm ensure that we are philosophically and "mechanically" ready?

I believe the answer to this question is to try to emulate what successful firms develop globally. When we step back and look at the truly successful firms, regardless of location, country, industry or longevity, they have been able to build an enterprise driven by trust. Robert Greenleaf's text entitled Servant Leadership is the absolute best book to help you build and develop a trust based operation. This is the key to unleashing the creative power and spirit in your business.

I am sure that we would all agree that the global economy is accelerating at a pace that increases every day. The cash flow environment today demands that we and our clients produce the highest quality product or service at the lowest cost possible, period. All of us are daily asked to produce more for less, and at a greater speed than ever.

Only "Trust" based Accounts Receivables Factoring firms will be the survivors

How do I know if I have my factoring Accounts Receivables firm is a "trust" based enterprise? Again, the first step in the journey is to ask difficult questions and do some corporate soul searching. As Greenleaf notes, there are 2 distinct points on the trust pendulum; a high trust vs. a low trust organization. Where is your firm on this spectrum? Take the Trust Culture test, by thinking about which end of the spectrum you are on. Which of the two extremes do you honestly fall into below, or are you in the middle? As the lyrics from the song [as the beginning of this article] suggest, there is always time to change the road you are on.

Does your factoring and specialized financial services firm operate in a low trust culture, with these visible signs?
- High control management
- Political posturing
- Protectionism
- Cynicism
- Internal Competition

Or a high trust culture, with this attributes?
- Set of Values, followed everyday
- Sense of fairness, honesty, respect and contribution
- Organization that builds a conscience
- Has an "inward moral sense of what is right and wrong"

It is imperative that you know where you are on this spectrum, and develop a plan today to move from a low trust to high trust organization. I am convinced that not only will the high trust organizations succeed; they will endure when they are committed to the daily utilization of the 4 dimensions of Trust:
- Sacrifice
- Inspire
- Ends = means
- Relationships are everything.

These 4 dimensions of trust, along with the 5 basic ground rules that we have implemented to achieve a high trust organization relative to cash cash flow financing and these will be presented in the next article in this series. As a preview, the 5 basic ground rules are:
- Serve and Mentor
- Have Integrity
- Exhibit Decisiveness 
- Be Persistent
- Focus

Feel free to email me at any time with questions, observations, comments or if you need any additional information on the discussed topics. I can be reached via email at mark@ucfunding.com.

For additional information regarding factoring accounts receivable as well as a Factoring FAQ see our website at www.ucfunding.com