Finance & Accounting

Among the many sometimes contradictory signs that the economy is/may be/is not recovering from the financial crisis of the past few years is this report from the Huffington Post whose headline states "Small Businesses are Having an Easier Time Getting Loans, Fed Survey Finds"

http://www.huffingtonpost.com/2010/08/17/small-businesses-are-havi_n_684480.html

According to this article, which reports on a recent Federal Reserve survey of bank lending practices, "Banks have eased lending standards for small businesses for the first time in nearly four years...Banks had been reporting relaxed credit standards for big corporations. But the new survey marked the first indication that credit was beginning to ease for smaller companies."

While this is certainly welcome news, such a headline seems to be grasping at whatever snippets of good news there is out there in the finance sector...certainly an understandable impulse.  But while credit conditions may be easing somewhat for some small and medium sized businesses, are they easy?  That is, have conditions returned to a normal level where smaller businesses can access the credit they need to support and expand their businesses as their customers increase orders?

I have had conversations with suppliers on the Ariba Network and with business owners around the country who indicate to me that, for the most part, they are not seeing liquidity sources open up and are still struggling to achieve the cash flow levels they need to support their business growth.  Indeed, a blog that I follow (TRE Observer, by Charles Lightener, treobserver.blogspot.com) recently commented on the same situation while giving anecdotes that seem to contradict the contention that credit conditions are much better.  Specifically, he was commenting on the fact that so many suppliers are seeing their receivables being paid late, or their terms extended by their customers, but the result of that is the need for credit/liquidity to cover that cash flow gap...and suppliers he spoke with were having a very difficult time finding it in traditional markets.

But while traditional credit sources (i.e. banks) may or may not be making things easy on small and medium sized businesses, there are new sources of liquidity that have emerged in the crisis and are becoming more mainstream.

One of which is Ariba Receivables Financing (powered by The Receivables Exchange), a tool available to suppliers on he Ariba Network to offer their approved receivables up for sale to the best bidder on a scure, online auction where they can receive funds in as little as 2-3 days (Click this link to learn more about this: http://www.ariba.com/programs/tre/).

Another tool is Ariba Discount Pro which gives Buyers and Suppliers the ability to collaborate over early payment of approved invoices.  Using this tool, Buyers can use their excess cash to inject liquidity into their supply chain by paying suppliers early at an agreed upon discount, resulting in lowered supply chain risk and greater return on idle cash reserves. (http://www.ariba.com/solutions/workingcapital.cfm)

Bottom line, there are very good ways for suppliers/SMBs to access the liquidity and cash flow they need to support and grow their business as the economy recovers, but they aren't necessarily to be found in the traditional sources of credit.  While there is someeasing of credit from some banks, the Huffington Post article quotes Mark Zandi, chief economist at Moody's Analytics as saying "Credit conditions are still incredibly tight..."

Easier for small and medium sized businesses to access bank credit?  Maybe.  But EASY?  No.

How about for you?  If you are a small or medium sized business, I am very interested in hearing your story around accessing credit and cash flow.  If you would be willing to share your experience, please comment below.

The article that appeared in today’s Chicago Business.com on the digital receivables auction highlights the value of a business network to suppliers that can’t tap traditional credit sources for needed cash.

Ariba partner The Receivables Exchange is providing a valuable source of financing for small and medium-sized businesses. The longer it takes for these businesses to get paid, the more valuable this type of funding option becomes.

Receivables financing is an example of how organizations are exploring new ways to better manage their working capital. In today’s business environment, shoring up working capital management processes has become a priority for organizations of all sizes.

The recently published APQC study, “Working Capital Management: New Strategies for Maintaining Financial Strength through Economic Cycles,” documents actions that leading companies are taking. The report includes survey findings and interviews with CFOs and other senior finance executives on strategies for improving working capital performance. In it, you may find ideas that your organization can put to good use.

The revised 2010 Tax Compliance Country Guide V33 includes a new chapter for Malaysia.  As with previous versions, these updates were written and signed by KPMG.  Ariba has now made 11 country specific updates or additions in calendar year 2010.  

What is interesting about Malaysia is as follows:

• Malaysia currently does not have a GST      or a VAT regime. 
• Instead, Malaysia has a Sales Tax which is a tax      on imported taxable goods and taxable goods that are manufactured in Malaysia and a Service Tax which tax on      the provision of prescribed taxable services by taxable persons.  The      Malaysian Government is proposing to implement GST by mid 2011 and the law      was scheduled for second tabling in the Parliament in March 2010.       However, the Malaysian government has postponed the second reading of the      GST Bill indefinitely on 21 March 2010 and as at to date, there is      still no rulings or guidelines issued in respect of e-invoicing in Malaysia. 
• For now, all forms of e-Invoicing are allowed in Malaysia, provided that the Director      General of Customs (“DG”) has given its approval in writing and subject to      any conditions as determined by the DG. 

To supplement a customer's need to obtain DG approval, see the following blog entry "What confirmation is available that the Ariba process and infrastructure are tax compliant?"  We attached a sample letter sent to a Tax Authority which can be retooled for Malaysia or any other country.....

http://exchange.ariba.com/community/solutions/finance/blog/2009/10/19/what-confirmation-is-available-that-the-ariba-process-and-infrastructure-are-tax-compliant

Depending on what the Malaysian Tax Authority wants to do after receiving letter, Ariba provides the following additional tools to support the DG's review process:

• 2010 Tax      Compliance Country Guide V33
• CEN Compliance Matrix - Another tool, that helps customers      communicate the controls in place with the Ariba soltuoin is CEN Compliance Matrix.  Having      a compliant solution is ultimately about having the right control points      as part of a customer’s end to end solution.  The CEN did a great job pulling      together a framework and standards for defining these types of      controls.  In the matrix, we defined the control points and      cross reference specific chapters of the Country Guide where more      elaborate explanation is necessary in this matrix.  Although      these are standards are defined by Europe, I think the structure for      defining control points is a good one and the work can be leveraged for      any geography. See http://www.cen.eu/cen/News/PressReleases/Pages/eInvoicing.aspx for more information on the CEN.

See Ariba's Country Guide for more details on how the Ariba solution maps to the Malaysian requirements.

If you are interested in e-Invoicing in Malaysia, please contact your Ariba representative for the latest version of Ariba's Country Guide or to obtain the Ariba control points as defined in the CEN Compliance Matrix.