Is your Christmas budget precariously based on the bill that you hope your biggest client will settle in a few days' time, despite their record of tardy payment? If so, firstly, welcome to one of Hong Kong's biggest unofficial clubs. And, secondly, 'invoice finance' might be for you. If you are acquainted with the concept, you'll know how beneficial it can be to cash flow.
However, if you're a finance industry professional, invoice finance is worth eyeing for 2012. It's a growth area, and does particularly well during economic downturns.
'Invoice financing is a widely-used form of short-term borrowing against already-issued invoices that companies use to enhance their working capital position,' says Anand Pande, head of product management for Asia Pacific at the Royal Bank of Scotland's (RBS) global transaction services. 'This form of financing [enables] companies to react quickly to cover working-capital shortfalls.'
Given the times we're in, invoice finance is well positioned. 'Export-oriented Asian businesses might face lower trade volume and sales to their major trade partners in the United States and Europe. This, in turn, would reduce the need for financing,' Pande says.
However, some companies may face delayed payments from their clients or buyers as a result of the current subdued economic outlook, which would cause a shortfall in cash flow. These companies may then choose to use invoice financing to improve their working capital.
While invoice finance is already widely entrenched in Hong Kong commerce, it is set for growth. 'As the global economic and trade outlook remain uncertain, corporations need to quickly develop strong supply-chain finance management that will provide the flexibility to unlock working capital and maximise returns from trade assets, which support the financing needs of their key suppliers to avoid supply chain disruption,' Pande says.
'RBS has been steadily growing its invoice finance service through its global transaction banking franchise in Asia. We have invested in attracting the right talent to further grow the business and support our clients' needs,' says Pande. 'Looking at the broader picture, current trade and industry forecasts are showing that Asia will be leading economic growth globally. This should translate well into career opportunities within the industry.'