Gail Winther was recently featured in The Commercial Factor Magazine for her article about the importance of Client On-Boarding.
I started in the Commercial Finance Industry over 26 years ago. The first 20 years in the software industry and the past six years on the factoring side. Initially the software company was a large ABL platform, and then tailored down to PC small ABL software, evolving into detail invoice tracking which became Factoring software. Factors required modifications to the system to prevent fraudulent or misguided client behavior. We created various protections – duplicate invoice tracking, no future dated invoices, warning when clients and debtors were going over credit, audit letters, debtor statements and tracking Notice of Assignments to name a few. When training clients on how to use the software I learned about the various industries that needed the assistance of factoring and we would discuss the best method to utilize the software when performing operation or monitoring their portfolio.
With this knowledge I left the software company and went to work for a factor. I knew operations well and heard all the stories of client fraud. Regardless of this information, there have been a few clients who went rogue on my watch. Problems occurred regardless of the procedures we had in place. Our portfolio was growing quickly, with an increase in daily funding demands, and new staff to train – it is hard to find employees that know about factoring much less understands the procedures. (I think the account executive class at the IFA should occur at the minimum every six months).
One problem occurred with a long term client that was allowed to continuously flow through our system without strict procedures in place. Thanks to an alert collection staff member she noticed a regular ACH debtor had stopped making payments. We called the debtor and were told the client had them change the payments to the client’s bank account. We defaulted and stopped funding, fortunately, we were able to salvage the client and resume funding. We now have strict procedures going forward – but it was a headache we could have avoided. In hindsight, the majority of the issues occurred because we did not perform a proper on-boarding call.
The most important step in preventing a variety of client issues is the initial on-boarding call.
You should reserve an hour or more for the Client On-boarding call which provides detailed information regarding your program. The steps regarding initial setup, initial funding, and processes going forward. The on-boarding call and information you send to the client is based on the niche they belong too. Whether it’s general factoring, re-discounting, construction, and transportation the procedures and information requested will vary. I have a separate on-boarding checklist for each individual niche.
Note: The on-boarding call can be extremely difficult if the client does not know what is expected of them in advance – therefore it is very important for the BDO’s to know your procedures – I have a flow chart that we have reviewed at our quarterly meetings and continue to discuss.
Prior to the call I email the client attachments of what will be discussed. The email includes; the Client Procedure Manual, Notice of Assignment for them to sign and return, excel spreadsheets for customer information and invoice importing, and schedule of accounts for funding requests. I ask them to print out the Client Procedure Manual and have it available for everyone on the call. I also suggest their accountant or controller is on the call as well then we are able to discuss the accounting process.
I start the call with the Client Procedure Manual – literally reading all pages and pausing to ask if they understand the various topics. The manual includes some of the following:
• Customer (Debtor) Verification and System Setup.
• Initial Funding Procedures.
• Notification and Audit Procedures – to include sample letters.
• Debtor statements are sent out monthly to all debtors. For the Factor I cannot stress enough the importance of debtor statements. This is how we find out about invalid invoices and it decreases the DOS.
• New Debtor Review – the importance of contacting our credit department PRIOR to establishing a relationship with the debtor to ensure they are credit-worthy and a limit is established.
• On-Going Purchases – Emailing us invoices, supporting documents, invoice spreadsheet to import, their aging report, and cut-off time for funding
• Collections Calls – our staff will make the calls.
• Factoring terminology and how to read reports.
• Chargebacks – Short pays
• Reserve Release and the formulas regarding the release.
After reading the manual I discuss at length the Notice of Assignment letter, that is goes to all debtors and only we are allowed to release the notification. As mentioned above our client, who was desperate for additional funds, was able to redirect the debtors payment. We stress to debtors when making our verification calls that this notice is only to be released by us – this is tough because you are trying to develop a positive relationship with the debtor and you do not want to alarm them. Therefore, we continue to verify our payment information on collection calls. Quite frankly, I am not sure how you completely protect yourself from misdirected payments.
I am very fond of spreadsheets and importing data is quick and saves time. I send templates to the client for invoice and debtor contact information. I also walk them through downloading their data to the templates. Initially the first few files will be incorrect – it’s easier to just fix the imports yourself, but if you do that the first time you will end up fixing it every time. The contact information once imported is then verified with Google to ensure the phone numbers and addresses match what we have imported.
During the on-boarding call I use a checklist to ensure all items are covered. By the end of the call they should understand that prior to the first funding; all of their customers will be notified, credit limits established, and all invoices will be verified on the first funding. It is very important to listen and repeat their questions back to them – typically factoring is a new concept for them and the procedures may be overwhelming. I have found out on several occasions that there has been miscommunication on the call – even after reading them the manual.
We also provide re-discount funding this is difficult because you are once removed from the debtor. The Factors client becomes your debtor and the customer your account this can be confusing when importing the data and monitoring the aging. The on-boarding process for this call will be completely different. The information requested differs – the following are in the procedure manual for re-discount clients:
• The factors lockbox is locked by their bank via a contract between the bank, the factor and yourself. Collections are swept into your account on a daily basis.
You will need access to the lockbox to view checks that arrive and the statements sent to you on a monthly basis.
• Copies of all notification letters, initially and going forward.
• All debtor addresses and contact information for the factored clients as an on-going basis
• Borrowing Base Certificate (BBC), invoice import spreadsheet, invoices along with backup (yes your server will fill up quickly), and current aging.
• Periodic Invoice verification calls will be made by you on the factors behalf.
The factor may submit invoices on behalf of the client that are invalid to increase his BBC.
It also helps when the factor is not making proper verification calls – you can stop a fraud for the factor.
• Access to the factors database, however, if they divert funds you will be locked out of their database.
To reiterate – Re-discounts clients are difficult because you are once removed from the debtor. If a factor has been in the business a long time they are knowledgeable on how best to divert funds. Once this occurs you obviously stop funding, but it’s a quick race to get your funds back. If you have been acting on their behalf and know the clients debtors it will be easier to stop the diversion. I have learned a lot about this niche and the issues that arise – if anyone would like to discuss please feel free to call me.
Regardless of how successful the on-boarding call goes with your client, without continuous communication with your client and their debtors problems may arise. No matter what is being done in the factoring space – whether it is – rediscounting, participations, or ordinary factoring to small business; it is important to lay out the groundwork for a strong reliable relationship by ensuring that the on-boarding process talks place and that we factors continue to notify and verify everything.
See more photos from our Wine Tour on the RMP Capital Facebook Page. Don’t Forget to give us a ‘Like’ while you’re there!
Hopefully the cool east end breezes will be blowing when RMP has our Annual Summer Get Together on August 2nd. The whole company is looking forward to enjoying a beautiful day along the North Fork Wineries. RMP will be taking a bus tour to 3 different Wineries and taste the flavors of what Long Island has to offer.
Along with the entire company coming in for the Get Together, RMP will be holding our quarterly Management Meetings on August 1st. We will be discussing our upcoming plans for the Fall and the ever increasing conference schedule when summer comes to a close.
Donald Barrick and Matthew Davis are in Newport, RI this week exhibiting at the Opal Financial Group’s “Family Office & Private Wealth Management Forum”. RMP is here to promote Factoring, PO Financing, and Reverse Factoring as a non-traditional style investment to high net worth individuals and families.
RMP Capital Corp. Partners with Interlink Capital Strategies to Offer Cash Flow Solutions for U.S. Businesses Importing Goods from Overseas
Contact: Sophie Yun, 703-752-5880 Extension 153, email@example.com
Contact: James DiCamillo, 631-630-9278, firstname.lastname@example.org
WASHINGTON, D.C.—July 18, 2013, Interlink Capital Strategies (“Interlink”), a Washington D.C. based financial advisory firm, announced today that it has entered a strategic partnership with New York based RMP Capital Corp. (“RMP”) to provide reverse factoring services to help existing and new clients grow their businesses and solve their cash flow concerns.
Unlike traditional factoring, where a supplier finances its receivables, reverse factoring is a financing solution initiated by the ordering party (in this case a U.S.-based company) in order to help its suppliers finance their receivables more easily and at a lower interest rate than what would normally be offered in many emerging markets. This process benefits the buyer by purchasing on credit terms thereby improving cash flow. Likewise, the U.S. company’s suppliers benefit from improved cash flow, and no risk of non-payment/delays.
RMP’s services are not limited to reverse factoring: it also offers many different types of cash flow solutions; accounts receivable funding, contractor financing, rediscounting lines of credit, transportation financing, resource monitoring services, community bank program, consulting service to small and midsize factoring companies. Based on this new partnership, Interlink will augment its existing capability in offering export trade finance products and project finance support in frontier and emerging markets with the ability to provide import financing to U.S. companies and their overseas suppliers.
Donald Barrick, President of RMP commented that “Our new Strategic Alliance with Interlink brings our companies the ability to assist our clients with alternative financial solutions which will help them compete more effectively on a global basis. I am confident that our new relationship with Interlink will prove to be successful.”
Alan Beard from Interlink stated, “We are excited to expand our corporate capability to assist U.S. companies that are importing, particularly from emerging markets. We are looking forward to a productive relationship with RMP.”
About Interlink Capital Strategies
Founded in 1994, Interlink provides financial consulting services and business development support focused on frontier and emerging markets. Interlink has successfully arranged structured and project financing, trade finance, business development and marketing support in the billions of dollars using government lending programs (i.e., Export Credit Agencies and Development Finance Institutions) and technical assistance for transactions in Latin America, Africa, the Middle East, Southeast Asia, former Soviet Union countries and Eastern Europe.
For more information please visit http://www.interlinkdc.com
About RMP Capital Corp.
Organized in 2000 and based on Long Island, NY is a national provider of factoring solutions for small to medium sized businesses, we also provide portfolio management services, and rediscounting lines of credit to independent factoring companies. In addition, RMP Capital Corp. provides factoring solutions for trucking companies, import/export factoring, public works contractors, as well as risk management services for contractors.
For more information please visit www.rmpcapital.com
EVP, Jim Dicamillo, will be presenting next week at the CFA’s Lenders Finance Conference in Chicago. He will be on a panel discussing Rediscount Factoring and the current state of the market.
Along with him will be: Toby Dahm from Hennessey Capital, Justin Gordan from TAB bank, and will be moderated by Cole Harmonson from Far West Capital.
Check out the link to event: https://www.cfa.com/eweb/dynamicpage.aspx?Site=CFA&WebKey=e80ee8ba-f4bf-4f9b-8cb7-0ed3619be181