What is the best way to provide liquidity for shipping companies?
Transport companies face many difficulties. One of them is to ensure adequate financial liquidity, which is not easy when the contractors ever try to extend payment terms. So how are we going to deal with it? Let’s ask a specialist. Urs van Stiphout is the Co-Founder and President of the Management Board of invoitix ag, which offers invoice purchase services for transportation companies on the European market.
Mr. van Stiphout, do you think maintaining liquidity is the biggest risk of the transport industry?
Yes. The scale of this risk is primarily influenced by the changing base of contractors and the difficulty of assessing their risk by transport companies.
Lack of information or delay in making a decision may lead to losses.
Exactly. Therefore, it is important to provide entrepreneurs with reliable information. invoitix ag provides its clients with access to a database of over 4,000 contractors, which we assessed in terms of their payment discipline. Also, if we determine that a contractor is financially solid, invoitix pays such invoice within 48 hours to the transport company. It is therefore not only information for the transport companies, but a real commitment in terms for cash-flow paid within 48 hours from invoitix to the transport company.
Obtaining such information certainly costs money.
No. Our clients have access to the database of contractors for free under the contract, under which they primarily sell us their receivables in EURO related to international transport.
Please tell us how it works.
After completing the transport, our client sends an invoice purchase order via our application – it is important that he provides us with all the information about the contractor, transport and that he includes in the application scans of the transport order and proof of delivery. invoitix accepts the purchase order and pays the invoice amount (net of the commission charged by us) to the client’s account within 48 hours. The application generates an invoice that is sent to the contractor in the name of the transport company, along with the information that the resulting receivable has been sold to invoitix and the payment is to be made to invoitix’s account. Then invoitix waits for payment from the contractor and takes full risk of late payment or no payment at all.
And what happens if the contractor does not pay to invoitix?
When signing a contract with us, the customer has the option of choosing one of the two options for taking over the risk – in the first option, invoitix bears the entire risk of the contractor’s payment and the customer does not have to worry about whether or not invoitix will receive the payment. In the second option, our client bears the risk up to a certain amount for each contractor. This means that if the contractor fails to pay the invoices for an amount greater than the agreed amount, the customer bears the risk only up to this amount. The risk of transport activity carried out for a permanent group of contractors (generating invoices for larger amounts with only a few contactors) is different than in the case of a fragmented portfolio of many contractors, when the invoice amounts are usually lower than in the first case.
Who can sell the invoice?
Each entity that conducts international transport activities and settles its services in EURO can sell invoices to invoitix. We work with entities with a long history of operations (and a large fleet) as well as with newly established entities that start with one vehicle.
Please tell me how much does it cost?
We only charge for each invoice requested for purchase. The amount of fees depends on the volume of cooperation between the client and invoitix, but we do not charge any fee for granting, increasing or not using factoring limits because our clients do not need such a factoring limit. We look at payments related to international transport services from the perspective of the contractor’s risk. The payee’s limit and risk are what we can assess, giving our customers the opportunity to focus on what they do best – delivering cargo all over Europe.
Thank you for the conversation
Visit invoitix website for more information.