When The Little Brewing Company expanded distribution through Woolworths' liquor outlets, factoring helped their cash flow and ensured the business kept bubbling away.
Sealing the "big customer" is something most SMEs dream of – then many have to deal with the frustration of not being able to secure funding to support their growth.
At Port Macquarie on the NSW Mid North Coast, husband and wife team and craft brewers Kylie and Warwick Little are in the process of a major expansion of their brewery’s capacity. The brewers of Wicked Elf and Mad Abbot beers have found a market niche, including a distribution channel into Woolworths' businesses BWS and Dan Murphys.
According to Kylie Little, The Little Brewing Company's CEO, cash flow became a big issue because, despite Woolworths' regular monthly payment cycle, there were still the timing issues that come when one big client accounts for 60 percent of a business, or when all your small customers order at once.
"When we have many small orders for a couple of cartons or kegs, each orders on 30 to 60 day terms all at one time , the combined value of orders can be substantial to our small business," Kylie said.
"So being able to factor the combined value of smaller invoices, as well as our major customer's invoices, helps cashflow planning. Factoring really helps us bring cashflow a little closer to the point of sale."
Successful factoring is all about building the right relationships with your invoice finance provider, and ensuring they understand what makes your business tick.
"We'd been approached by many factoring businesses in our early days. Some of them told us we were too small, but FactorONE looked at us and understood our expansion plans and backed us."
She says FactorONE provides additional services such as issuing statements and chasing overdue debtors.
"Another positive is FactorONE has been prepared to look at circumstances as they change for our business, and structure arrangements accordingly.
"They've been willing to discuss how to handle the situation of a slow debtor who exceeds an acceptable term beyond the due date of an invoice, so that funds are recovered without affecting our relationship with the customer."
In mid-2012, when The Little Brewing Company signed up with FactorONE, they were brewing $60,000 in stock a month – and have now doubled production capacity.
"We've got great relationships with Woolies and FactorONE, who have now increased our limit on Woolworths invoices to $100,000 at any one time to cover this."
Kylie said they are on a path to build a whole new brewery with automated packaging and the capacity for a minimum of one million litres annually. They installed two large new tanks last November, which enabled them to distribute through BWS, and they've recently secured the next door unit with an eye to expansion.