So your group has opened a so-called ‘reverse factoring project’, but for what purpose exactly?
The goal of this project which was launched over a year ago has actually evolved over time. Rather than setting up standard reverse factoring, the basic idea was to adopt a CSR approach with regard to our suppliers (in a difficult context of lowered milk prices and financing difficulties for milk producers). We therefore considered offering to pay them earlier. The plan was not to extend our payment deadlines to the detriment of suppliers, especially as we wanted to use our available cash at the same time. However, it has since been used with the acquisition of Materne Montblanc (850M€). The project is still effective and we are ready to slightly reduce the Group's WCR, aware that paying our suppliers in advance represents optimal investment, based on our knowledge of the counterparty risk and remunerated by a discount, as well as observing that it is increasingly difficult to place cash with positive rates.
Where is the project?
Given the fragile context of milk producers today, and the complexity of the project with suppliers, (very short deadlines) we decided to postpone the implementation of the project for the moment. We will refer it to our other suppliers, who are paid at 60 days or more. A multi-country solution would require us to take into account the variable regulatory constraints depending on the country. The scope will be limited to France to begin with. We are testing the willingness of some of our suppliers to use the solution and looking at the results, we will see if the volumes justify an assembly and the intervention of an external financier. We have noted already that the project is very structuring: it involves Purchasing, Accounting and IT and requires a real organisational change. The topics it addresses are those that are usually abandoned, such as the optimisation of accounts payable, the rationalisation of payment campaigns etc ... with productivity gains at the key. We expect to begin with at least one hundred suppliers and an outstanding of 10M€ in invoices payable in 60 days, in which case the assembly would be paid back in one year while putting our cash in the service of the economy. In the long term, outstandings can be much higher.
Will you use banks?
We are sceptical about reverse factoring offers/banks because they are mainly interested in large suppliers with KYC problems which tend to make them selective. In addition, their solutions are not neutral for suppliers and often appear as factoring in the statistics of the Banque de France. Finally, their intervention covers potential hidden costs. We would rather seek FinTechs, like Corporate LinX, who have more advanced expertise and products, and on the programme financing front can associate via medium-term and long-term investors through Common Funds of Securitisation (FCT).
Benoît Rousseau, director of financing and treasury of Fromageries Bel