Suppliers can now heave a sigh of relief with the introduction of invoice factoring in Ghana, which is to ensure that they get paid on time when they have supplied goods and are awaiting payment – which in many cases takes forever.
In fact, the standard time for suppliers to wait before being paid for goods they have supplied is within 30-60 days, but checks within the Oil & Gas, Mining, Health and other sectors show that accounts receivable on invoice can take between 60 and 300 days before payment is advanced for a particular supply executed.
This, industry players have said, has impacted negatively on many of the firms engaged in supplying.
Commenting on the matter, CEO of Lynch Capital Frederick Nii Oto Dodoo told the B&FT that issues of finance continue to impede the growth of indigenous businesses and companies within the supply chain process in Ghana, despite government intervention in promoting industrialisation and job-creation.
If not checked, the situation could erode the gains that are expected to be made in local content in various sectors, he said.
Appearing on the ‘BFT Chat’, Mr. Dodoo said: “Funding is one challenge for suppliers and businesses involved in the supply chain in Ghana, and this has contributed to some companies becoming insolvent. I must say suppliers have had to wait for between 30 and 300 days before they get paid for work or goods they have supplied.
“We believe that there has to be some arrangements which can create some room for the companies to access funds which will help them stay in business and be able to supply if they have to. But we have come in with something new: that is, the invoice factoring which is going to be a game changer and will allow these firms to stay in business.”
Invoice factoring is a financial transaction and type of debtor finance in which a business sells its accounts receivable (i.e. invoices) to a third party (called a factor) at a discount. A business will sometimes factor its receivable assets to meet its present and immediate cash needs.
The new product (Invoice Factoring), which is fairly new in Ghana according to Mr. Dodoo, does not make them a debt-collections company, because they do not harass clients or demand payment but rather act as a financial partner as they understand the importance of managing the relationship for further business.
“We are here to provide that relief to suppliers in this country. Our main objective is to finance local content, especially the suppliers who are mainly Ghanaian companies for sectors like Oil and Gas, Mining, Health, Telecommunications, Manufacturing and so forth. We are the game changer who will ensure that we do not lose sectors as mentioned to foreigners who will come in and take over those sectors.
“So, funding really and truly beyond where we are now for local companies should be an easy thing to manage going forward. Our expectation going into the future is that we will play a meaningful role in this area, and we will expect to see local companies coming onto the big stage to perform. We have to change the narrative and allow Ghanaian companies to grow and begin to play with the big players in such industries. Because we are in it, changes the game totally.”
The solution, Mr. Dodoo said, is with his outfit – assuring that “What is expected of the suppliers is they execute the contract to supply and we will ensure they receive the cash using the invoice factoring process, which pays upfront at a small fee”.
With collateral being one of the biggest challenges for many in recent times, as it is required by finance houses and banks, Lynch Capital Ghana Limited does not require it – as the invoice that is confirmed by the receiver of the goods is enough collateral for the funds which are to be advanced to the supplier.
The company, he said, also has another product – Payroll management – which is very much important and brings relief to firms.
“We have a broad spectrum of products which include payroll financing. What am I saying is that a company’s payroll can be managed by us. If a company, especially on the supply side or whatever one is into, for some reason is not able to meet its payroll obligation in a particular month, what do you do? Just send us the payroll details schedule and we will do the payment and give you some 60 days to pay back at a small fee. We do not take collateral in all our transactions,” Mr. Dodoo pointed out.
“So, if you are low on cash as a firm but its payday, just let us come in and help you as usual at a very competitive fee on flexible terms and, again, no collateral. This is to help firms to organise themselves and their finances very well.”