[Fashion] Growing your business without cash flow problems!

Growing your fashion brand without having to worry about cash flow problems? This is the kind of service that Webhelp Payment Services and Lea Trade together propose to French and international fashion, footwear and accessories companies.

Which companies are concerned?

Whether set up recently or established for several years, some fashion brands face procurement problems, often associated with early payment of their suppliers.

"We are sometimes called upon to help newish brands, or well-established brands that are going through a period of stagnation, or even a slight downturn," explains Aline Abeya, Sales Manager, France & Benelux, for Webhelp Payment Services. "These companies are often faced with bank restrictions, and this can affect their supplier credit and the development of their business."

Typical case:

A company is unable to pay its suppliers, situated abroad. Its revenue is insufficient or stagnant, and its ratios do not allow it to obtain the credit lines requested from the banks or the suppliers.

Yet it is not uncommon for Webhelp Payment Services to be on terms with, or even already to manage, the end customers of said company: in which case, the latter can entrust its accounts receivable to Webhelp Payment Services. In turn, in the framework of an exclusive partnership, Webhelp Payment Services can task Lea Trade with paying the suppliers concerned.

To summarise, therefore: the company submits its invoices to Webhelp Payment Services, which collects the payments, and passes them on to Lea Trade for reimbursement. The solution can be implemented quickly and easily!

Supporting a brand's strategic developments

To face growing competition and longer payment deadlines, many modest or average-sized players are changing their strategy. They often try to redeploy over the web, in particular moving toward B2B marketplaces.

For example, Webhelp Payment Services manages all the financial transactions of the shoesfromspain.com marketplace, created by the Spanish footwear association.

And since September 2018, Webhelp Payment Services has managed the B2B marketplace of premierevision.com, the international trade show for fashion procurement.

"For Webhelp Payment Services and Lea Trade alike, the challenge consists in being able to support brands, whatever the chosen distribution model, and whatever the change they wish to undertake!", concludes Aline Abeya.

 

 


Tips to optimise your business’ cash flow

Priscilla Jokhoo, Business Services Director at the Fédération Française du Prêt à Porter Féminin, who has organised the Paris Traffic fashion trade fair for the last three years, began by saying, "Fashion seasonality leads to very long cycles: between the time you create a garment and the time it brings you your first euro - about 18 months - you will spend your time writing cheques!"

Priscilla Jokhoo assists around a hundred brands a year on a daily basis, at each stage of their economic development. Her verdict is clear: "Most failures are not due to a bad product or bad positioning, but occur for two reasons: lack of structuring, and/or too rapid growth. Remember that this is impossible: you can only self-fund".

Anticipate your working capital requirements

Cash flow structure varies according to the stages of a brand's development. This principle shows, for example, that accounts payable are relatively more important for a young company.

"When you start your business, you will have leverage on accounts receivable, but little leverage on accounts payable. Then, when the company is over three years old and can prove its financial health, it can negotiate with its suppliers, which will reduce its liabilities. But your B2B customers will ask you for payment terms", explained Aline Abeya, France & Benelux Sales Manager at Webhelp Payment Services.

As a result, cash flow levels vary greatly from one stage to another and may decrease sharply, putting the company in difficulty. Anticipation is therefore essential!

Watch your credit ratings

"Your credit ratings are crucial over the entire life of your business. They are issued by the main credit insurers and rating agencies that analyse corporate balance sheets and are connected to national sources of banking incidents and failures. All suppliers throughout the world can access at least one of these sources that gives you a credit rating. You must also make your business social security and VAT payments without delay because they affect your credit ratings", Aline Abeya recommended.

Another recommendation: send your first balance sheet to the three main credit insurers: Euler Hermes, Atradius and Coface.

"You must communicate with them at every stage of your business life. If you have had to cope with a difficult situation, you must explain the reaons and the solutions adopted," explained Aline Abeya.

What is the advantage of a good credit rating? It gives you leverage to negotiate with your national and international suppliers. For example, you can try to find a contract-based solution over several seasons: your supplier may then be able to grant you discounts.

Leverage best practices with your customers

Several recommendations involving customers will avoid unpaid or late payments:

  • use a specialist lawyer to draw up solid General Terms and Conditions of Sale (GTCS)
  • insist on signed Purchase Orders, without exception!
  • ensure that invoices are properly drawn up in accordance with the standards and practices of the countries concerned
  • issue an invoice upon delivery
  • request payments before delivery if you are a young company
  • carry out quality control prior to delivery.

And Priscilla Jokhoo added: "In many situations, I have found that certain customers have exploited loopholes in poorly drafted GTCS! You should also pay close attention to your customers' General Conditions of Purchase (GCP), for example, with respect to returning unsold items".

Use leverage to improve cash flow

Positive leverage effects on your cash flow: in the case of a first order, you should not hesitate to require a deposit payment, usually 30%.

"Your customer can very well understand that you expect him to make a real commitment to your brand, and not just an order "to see how it goes", Aline Abeya pointed out.

Also note the possibility of granting a 0.5 to 3% cash payment discount.

Webhelp Payment Services manages the accounts receivable as soon as the order is placed. In practice, once you have made a delivery, it is potentially too late, as the payment method or time may not have been appropriate to your customer's situation.

"Webhelp Payment Services gives you prior recommendations about orders with respect to the country where your customer is located: this is very important because it reduces the risks of non-payment at the order stage. Webhelp Payment Services' assistance extends to the collection of multi-country and multi-currency funds", said Aline ABEYA.

On the strength of its experience in the textile market, Webhelp Payment Services has entered into partnerships with financial institutions that rely on its wholesale management services to help brands source and finance their sales.

> To receive the pdf of the "Cash is king" presentation at the 2018 Traffic fashion trade fair, do not hesitate to ask Aline Abeya.

 

 


Tips to conquer an Italian market

Italy is a priority market for fashion and ready-to-wear brands, hence the dedicated Italy workshop that took place during the 2018 Traffic trade show. Here we give you an overview and top tips from Anne-Laure Druguet, Director of Projects at the Fédération Française de Prêt à Porter Féminin, and Claudio Milani, CEO of Webhelp Payment Services in Italy and Greece.

"Italy is France's number 1 customer, followed by Germany, the United Kingdom, Spain and the United States," says Anne-Laure Druguet, Director of Projects at the Fédération Française de Prêt à Porter Féminin, who specialises in helping French brands export.

In fact, the nature of the Italian market appears to make it an unmissable opportunity for France's ready-to-wear brands:

  • €66 billion annually, with a positive trend
  • 10.5% of France's exports in terms of value (up 7.1% on 2016)
  • In 2016, Italian women spent 10 billion euros on clothes, with the Italian menswear sales volume approaching 7 billion euros.
  • Distribution: mainly through franchises, chain stores and the retail sector (47%), followed chiefly by multi-brand stores (24%), department stores (13%), and online sales (5%).
  • There are big differences between Italy's regions, with the North being a more buoyant market.

1 – Make sure you have the right agent in Italy

Our assessment above focuses more on quantity, but Claudio Milani, CEO of Webhelp Payment Services in Italy and Greece, was more interested in talking about quality: “There are a huge number of stores in Italy, even in small towns and villages. With the odd exception, you can't “sell on your own” in Italy; you have to go through one or more agents, at regional or national level. Contrastingly, committing to a retail network appears to be a risky business."

But should your agent be single-brand or multi-brand? Claudio Milani says, "A small or medium-sized company would be ill-advised to take on a single-brand agent."

And Anne-Laure Druguet adds, "It's important you have the right fit with your agent and ensure you have the same objectives and development potential. You must also make sure you pin down your methods, such as reporting frequency, and agree a mutually binding commitment in writing.”

The Federation offers French brands help with drawing up agent contracts.

Claudio Milani hammers home the point with a quip: "You know who our best allies are? Agents. And our worst enemies? Agents." Hence his advice: “Find the best possible fit between your brand, your products and your agent”.

2 – Choose the safest payment methods and conditions

Like any market, the Italian market has its own particular payment methods, conditions and practices.

Webhelp Payment Services takes care of customer collection management and trade receivable management and acts as an insurance intermediary in various countries, including Italy. This means that Webhelp Payment Services enables you to personalise your payment methods and conditions individually to each of your clients.

To find out more, and in particular for details of the payment methods and conditions best suited to the Italian market and the best way to protect yourself from non-payment, feel free to get in touch with Claudio Milani.

3 – Devise a strategy tailored to the Italian market

As Claudio Milani says, “It's not enough to set yourself financial objectives in penetrating the Italian market. You have to devise, challenge and then implement your own specific strategy”.

This strategy must be consistent with your brand identity and culture. "But beware of imposing your own rules: think globally but act locally," adds Claudio Milani.

4 – Find the balance between sales and finance

Claudio Milani's last piece of advice: “If you focus solely on increasing sales, you'll expose yourself to a lot of risks. And if you put too much emphasis on financial security, you're in danger of missing some great opportunities. You have to strike the right balance to be successful!"

 

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