EXPERT SPOTLIGHT - Free up cash flow for growth with Sarah Lochead-MacMillan - Episode 13 of Better Business, Better Life!

Debra Chantry-Taylor 00:12

Welcome to another episode of Better Business, Better Life. I’m your host, Debra Chantry-Taylor. I’m passionate about helping entrepreneurs and their leadership teams get what they want at a business and life. On the show, I invite successful business owners and expert speakers to share their successes. They are open and honest about the highs and lows of business and also life as a business owner. We want to share those learnings with you to inspire you, but also to help you avoid some of the common mistakes. My hope is that you take something from each of these short episodes that you can put into action to help you get what you want. Not only out of your business, but also your life. So good morning, welcome to another episode of better business better life. And today I’m joined by the delightful Sarah Lochhed-MacMillan, who was the general manager of Geneva Capital. Is that right? right this time?

Sarah Lochead-MacMillan 00:59

That’s right. Good morning.

Debra Chantry-Taylor 01:00

Good morning. Thank you for coming on the show. Hey, just give us a little bit of an understanding Geneva Capital, what is it that they do?

Sarah Lochead-MacMillan 01:06

So Geneva capital is a subsidiary of Geneva Finance. But basically we are a small firm doing business lending, but only in a set product for cash flow.

Debra Chantry-Taylor 01:19

Right. And that’s set product is?

Sarah Lochead-MacMillan 01:21

That will be called invoice financing.

Debra Chantry-Taylor 01:22

Oh Okay, and so what exactly is invoice financing? For those who may not know.

Sarah Lochead-MacMillan 01:26

A lot of people don’t actually know what it is because it’s not overly widely used in New Zealand, but it is in Europe and the Americas. So invoice financing is the process of releasing money from unpaid invoices. So the business can use that cash flow to grow and do other things whilst waiting for customers to pay them.

Debra Chantry-Taylor 01:44

Okay, that sounds like a pretty good option. Why might businesses want to do that?

Sarah Lochead-MacMillan 01:50

So for many of the businesses, they have to wait maybe 60 plus days to get paid. We have some wholesalers who work with supermarkets can be waiting up to about 75 days to get paid. If you’re paying your staff weekly, that is a miss timing of cash. And you always have rent and power and bills like that to pay monthly. And if you don’t get paid for two months, how do you find the cash flow? So that’s why businesses would use us.

Debra Chantry-Taylor 02:16

And we’ve obviously going through… I’m not sure if it’s a recession or not. But certainly some challenges around a pandemic world has that had an effect on people making payment on their invoices?

Sarah Lochead-MacMillan 02:26

Yes, it has. So interestingly, I was at a presentation yesterday with the Kiwibank economists who said actually, the recession that they all expected didn’t happen. And it was a very sharp in and out and New Zealand businesses were quite adaptable in the way they’ve coped with this pandemic. However, I think everyone is nervous. And that sheer nervousness is making people want to hold the cash when they can, which is pushing out those days to pay. We have some industries pushing out to 80 days.

Debra Chantry-Taylor 02:57

Wow, that’s huge isn’t it?

Sarah Lochead-MacMillan 02:59

That is difficult.

Debra Chantry-Taylor 03:00

Yeah. Okay. And so how does it work? Like, in layman’s terms, what happens? So I’ve got all these people who are not paying me?

Sarah Lochead-MacMillan 03:10

Yep!

Debra Chantry-Taylor 03:10

And I’ve already done all the things around calling them and saying, Come on, guys pay your bills. But the reality is, we’re just in the queue with everybody else. What do I do if I want to release that cash, and use it.

Sarah Lochead-MacMillan 03:20

So I mean, you shouldn’t not stop calling, you should still collect in your debts and still be that squeaky wheel. But when you’ve got invoices, business to business, and you’re waiting on that payment, you effectively show us that ledger. And we release up to 80% of that money to you. Now, your customers don’t know we’re there. So we’re not going to collect that money for you. We’re not going to add to your data chasing process, but we’re just going to add to your cash flow, you will then use that money as you see fit. We’re not going to put a standard on that. But any money you use will then be repaid when your debtors eventually pay. So do they then pay Geneva? Is that the way that it works? Or does it get paid back to the business owner? How does it work? So we have a trust account? Which looks like you the business owner, but it’s actually controlled and reconciled by Geneva. So the customers then pay into that account, and we do the reconciliation and release any free cash to you and reduce the borrowing. So as you issue more invoices, you can make more things available to you and borrow more as your customers pay. The borrowing gets repaid.

Debra Chantry-Taylor 04:28

Yeah. Okay, that’s fantastic. And so what are you seeing businesses using that for at the moment? You mentioned, obviously, wages being one of the wages of rent were the other two key factors in most businesses?

Sarah Lochead-MacMillan 04:38

Well, yes. Bills always are being paid, I guess. We’re seeing applications come through when businesses adapt and change. So in the pandemic, businesses that were trading with supermarkets suddenly got bigger and bigger orders because people were panic buying. So the supermarket’s were trying to supply and they were going back to the people creating those products and saying, look, we normally take 50 grand a week, we’d now like to take 150 grand a week, which is a huge strain on resource, and also a huge strain on cash flow moving out in number of days to pay. So growth is a good one. With the other adaptability when you see labor in labor hire, companies doing temporary labor hire, have to pay workers weekly. But their contracts pay them monthly.

Debra Chantry-Taylor 05:28

and beyond.

Sarah Lochead-MacMillan 05:28

Yes, and beyond, yes, definitely. So that change has come about. And the change of people generally trying to hold their money to themselves a bit longer has caused payment days to spread out and businesses are still trading. They’re still doing quite well. We’re not talking businesses crashing, businesses liquidating we’re talking about businesses doing well. still growing, still moving, still selling. But just that cycle of cash has slowed. Yeah, fair enough.

Debra Chantry-Taylor 05:59

Now, I normally like to ask my guests on this podcast a little bit about themselves, because you haven’t always worked for Geneva Capital. You’ve got quite an interesting background haven’t you? – We’d like to share a little bit about your background with us…

Sarah Lochead-MacMillan 06:10

What? Origins?

Debra Chantry-Taylor 06:14

No but like a little bit because people want to know who they’re dealing with. And you know, what your background is, but also perhaps your professional and personal best. So what do you think is the best thing in your career so far, and in your personal life so far?

Sarah Lochead-MacMillan 06:26

So, my background is generally one in finance and banking. (I) came into banks in the UK when I left school. So I’ve always sort of dabbled through the finance world some way shape, or form. I did spend eight years running my own business. So, for business owners that say you don’t understand how hard it is, I do. I’ve had my house on the line. I’ve paid staff before I’ve paid myself. And I’ve gone to the supermarket and looked at the very cheapest thing…

Debra Chantry-Taylor 06:54

Bottle of wine?

Sarah Lochead-MacMillan 06:54

Shh! I never went to cask wine (box wine) and I’d like that on record! but,I certainly go to the $7.99’s. So, I know how hard that is. And I think going through that experience, makes you better financier. Because obviously, I’m not in bank anymore. I’m second tier. And I can understand the difficulties and the processes that go through that. To… have I had a real career high. Yeah, potentially, when I was running my own business, and I was out there speaking to businesses about doing things better about networking better, about things that can do for themselves, and learn for themselves.

Debra Chantry-Taylor 07:33

And that’s actually how I met you. I think first of all, wasn’t it?

Sarah Lochead-MacMillan 07:37

Yes, it was. Yes.

Debra Chantry-Taylor 07:38

Oh that’s great. Okay, cool. So that’s a little about your professional life, about your personal life?

07:43

My personal life? Oh, my God…

Debra Chantry-Taylor 07:45

I hear you running a half marathon!

Sarah Lochead-MacMillan 07:47

Yes, so half marathon… About five years ago. As you’ve known me for so long, you know, I was a much bigger, bigger lady. And my health became more of a priority to me. And so I decided to start exercising. I don’t know whose stupid idea that was. But I did decide to start exercising, and ended up in the year, first year of doing that of losing 43 kilos.

Debra Chantry-Taylor 08:12

43 kgs?! Wow, that’s pretty impressive. Well done!

Sarah Lochead-MacMillan 08:14

So you know, and it wasn’t a “oh, I lost it” in my mind. “I’m a big superstar and blah, blah, blah.” It was hard work! And somehow, I started running in all of that. So yes, and my friend said don’t run on the road. It’s not much fun. Let’s trail run. I don’t recommend it. If you don’t start. haven’t started. No, don’t start please. But yeah, so that is the running that we do. I think if I hadn’t lost the weight, I wouldn’t have found the cancer.

Debra Chantry-Taylor 08:45

Wow, yeah. Tell us a little about that. Yeah.

Sarah Lochead-MacMillan 08:47

So that was the lump in the breast. If I was still in a big lady, I wouldn’t have found it until it was too far gone to cure it. So I was really lucky. Really, really lucky. So I went through the operations. I went through chemotherapy. When I came out of chemotherapy. The next month I did the Auckland half marathon on the Auckland marathon day. Yeah.

Debra Chantry-Taylor 09:04

Well done!

Sarah Lochead-MacMillan 09:13

Raised $14,000 for the Cancer Society.

Debra Chantry-Taylor 09:16

Now that’s brilliant.

Sarah Lochead-MacMillan 09:16

Yeah, it just it was just so close to my heart to do something. Put it this way, I didn’t run it. This is how I know you can walk some of it.

Debra Chantry-Taylor 09:24

We had this conversation before we came on the podcast! I’m actually considering doing my next half marathon but my… I do not run.

Sarah Lochead-MacMillan 09:30

Yeah. So we we ran the first 11 then from there to the next 18. It was a sort of a run walk. By the time I got to the 18 I couldn’t do anything but walk but we did it and it was, I nearly burst into tears as I crossed over the line. I was just so relieved to get it over and done with and I usually do runs and I enjoy. Enjoy them. So next weekend. It’s the Rotorua Marathon but there are different difference distances to do and I’ve got signed up somehow stupidly to the half marathon

Debra Chantry-Taylor 10:00

It’ll be fun. That’s quite a nice little route that they do through there isn’t it in Rotorua?

Sarah Lochead-MacMillan 10:05

This one is through the forest. Normally I do the Xterra, which is around the blue and green lakes.

Debra Chantry-Taylor 10:10

Yeah. Okay, good. Well, best of luck with that.

Sarah Lochead-MacMillan 10:12

Thank you.

Debra Chantry-Taylor 10:13

So yeah, so that Yeah, so you’ve got some pretty interesting stories that you can share. And I guess you have the empathy, right, you understand what it’s like for people. Because I think sometimes working with business owners is a little bit of, I’m not sure if it’s ego, or it’s, you know, embarrassment, perhaps about sort of admitting that they’re struggling a wee bit. So it’s nice to know, they can actually come to somebody who has an understanding and has been there, done that got the T-shirt.

Sarah Lochead-MacMillan 10:37

Sometimes I think it’s disbelief that they’ve got to this stage. A lot of the New Zealand’s small to medium businesses are great at what they do, and less structured around how to run that business. And a lot of them, something will have been a catalyst, that they’ve suddenly got to this point that they need cash. Hopefully, mostly it’s growth and being successful. Sometimes, it could be they’ve made a mistake on one of their customers, and one of their customers no longer exists, which has put pressure on the rest of the business. But you know, I’m not looking for them to put the house in. And I understand things like this happen. And we need to look at our credit assessments and applications with a practical eye, not just a fit the box I.

Debra Chantry-Taylor 11:28

I think that’s the issue with the banks at the moment. I mean, they’ve really clamped down on what they will and won’t do. And I’ve had businesses go for bank loans, and literally has been turned away even though in actual fact, they have a great business. But banks, I think, have just got, I suppose they’ve had to tighten their belts with it. So

Sarah Lochead-MacMillan 11:44

Yeah, the banks, I mean, we always say come to us, and we’ll get you back to mainstream bank funding. The banks have certain credit regimes that they have to apply over the top, they’ve got quite a strict capital hold that they need. They were all expecting a long recession. So they all tended to put some capital aside to cope with defaults, the defaults generally haven’t occurred. But the sensible place to release that is not necessarily back into businesses. It would be more into bricks and mortar type funding, which of course is secure. It’s how you get your money back if problems occur?

Debra Chantry-Taylor 12:22

Sure. So in terms of size of business, that you can actually help, you know, what’s the smallest business you’ve helped, what’s the largest business you’ve helped,

Sarah Lochead-MacMillan 12:29

so we can actually help from new start upwards. We have a small business product, which I developed for Geneva Capital last year in conjunction with Xero, so that we could fix fees in, keep costs down for businesses and help them grow through cash flow. Generally, we like to help businesses that turnover over half a million, that’s per year in sales. Because it seems to work better for that sort of size of business, they usually got five more employees, and they trade business to business. That’s very important.

Debra Chantry-Taylor 13:05

So I’m gonna ask you in a moment how people get in contact with you, but what about some tips for people who are potentially thinking about how do they free up some cash for growth? Or maybe to, you know, to chat to cope with the challenges of the elongated payment cycles? What would be the three tips you might give somebody that they could start to think about?

Sarah Lochead-MacMillan 13:24

So some of them they should be doing already, but it’s this easy stuff? The first one is, if customers owe you money, be the squeaky wheel. Just keep asking for it. If you’ve delivered the service, there is no dispute the products there, The services done, then you’ve got to ask for the money deserve to be paid. And you must keep chasing, don’t just chase seven days, 14 days, 21 days and then forget to chase after that. Just keep saying “where’s my money? Where’s my money?” You will get paid.

Debra Chantry-Taylor 13:53

And you’re talking about actually picking up the phone, aren’t you?

Sarah Lochead-MacMillan 13:55

I’m talking about picking up the phone, sending an email, sending statements? as many touch points as you can to get your money? You know,

Debra Chantry-Taylor 14:02

It’s your money. Right?

Sarah Lochead-MacMillan 14:03

That’s right! Otherwise, you’re working for free? I don’t know many people who really want to call their business a charity.

Debra Chantry-Taylor 14:07

Yeah, it makes perfect sense. Great. Yep. So that’s the first one.

Sarah Lochead-MacMillan 14:11

If you’re a business that carries stock, how long has that stock been there? If it’s not perishable, then if it was bought two years ago, it’s already technically been written off through the balance sheet and through the profit and loss. So sell it. Any sale is cash back in the business. And people do love what they think is a bargain.

Debra Chantry-Taylor 14:34

And I suppose that could also generate new business out of it too, right? It’s sort of if you’re offering old stock at a reduced rate, it might actually prompt some of your older customers to come back for other products and services, right?

Sarah Lochead-MacMillan 14:45

Yeah, absolutely. Absolutely. But also it gives you a chance to touch base with anyone who’s bought from you before, regardless whether they’re buying from you now or not and say hey, we’ve got these bargains, and people will pay for that is that that would be payment upfront. That’s more cash back into your business.

Debra Chantry-Taylor 15:01

Right? Okay. And third and final?

Sarah Lochead-MacMillan 15:04

Look at what you’re spending your money on.

Debra Chantry-Taylor 15:06

Oh yes, that one!

Sarah Lochead-MacMillan 15:09

You know, when was the last time you reviewed your phone company? And what’s out there in the marketplace? Same with your power companies. Same with your stationery suppliers, and then look at what is being wasted? Or you know, are we are we spending on stationery and you actually open the cupboard door and there’s already 500 boxes of paper in there? Believe me, I had a very good friend. I’m sure she won’t mind cuz it’s not there anymore. But she’s a podiatrist and one of her staff got a bargain on paper towels, which we spent the next three years using up. Now, that’s only a very small business, but you upscale that to a factory, and you’ve got $100,000 of cash sitting in paper towels.

Debra Chantry-Taylor 15:52

Yep. Makes absolutely no sense. So is there a method you can use to sort of check them in, what would you do to check that out?

Sarah Lochead-MacMillan 15:59

If it was internal like that? Just a simple stock system, you know, how low do you need to get before you reorder? Yeah, and then you can put a card in there, or whoever’s in charge of that can know that, once a week, they look at that and say, okay, there’s one box paper, and I know, we usually use three a week. So I do need to order two, or I need to order three. So I’ve always got one behind. Not I need to order 20. And we’re done for the month.

Debra Chantry-Taylor 16:26

Yeah, because you’re right, because that takes away cash that you could be spending.

Sarah Lochead-MacMillan 16:28

Yes, absolutely.

Debra Chantry-Taylor 16:29

Okay, great. And so if somebody is thinking about invoice financing, what is the process they would actually go through? So they would, I don’t know, pick up the phone fill out a contact form? Or what do they do?

Sarah Lochead-MacMillan 16:40

Well they can they can pick up the phone to me direct if I’m allowed to give out my number?

Debra Chantry-Taylor 16:44

Absolutely.

Sarah Lochead-MacMillan 16:44

Okay, so the numbers 021462818. And just chat. Happy to do that to anyone, they can go to the website, genevacapital.co.nz and actually fill out either a contact form, or the quote form and upload some financials to that and we’ll get straight back to them.

Debra Chantry-Taylor 17:03

And does that hook into your Xero or your MYOB or do you just…

Sarah Lochead-MacMillan 17:06

No so those ones is totally in that customers’ control about what they’re uploading, we don’t hook into their Xero until they’re our customers. If they talk to me, I will, flix an email a Xero link, which Xero has devised a business finance report pack, it’s great. They just follow the link, it makes up a pack from their financials, and you just send that to us. And it’s everything we need to say, okay, this is what we can do for you. And this is how much it’s gonna cost.

Debra Chantry-Taylor 17:36

Okay, so they speak to you, they fill out the form that they do, what’s the next step from there?

Sarah Lochead-MacMillan 17:41

And from there, we do a standard application, every finance company has an application form. And we’ll do an assessment on the information that’s given to us. And usually within the week, if there’s no adverse information, we can be putting paperwork in front of their solicitors. And the next week, they can be using money.

Debra Chantry-Taylor 18:00

Okay, right. Well, thank you so much for coming and explaining that to me.

Sarah Lochead-MacMillan 18:04

Thank you!

Debra Chantry-Taylor 18:04

I think there’s often a bit of a sense that you know, if you have to go and get help that you’re in trouble, but in actual fact, this is just about using money more wisely, isn’t it?

Sarah Lochead-MacMillan 18:12

Correct! And look, just because the bank said no, doesn’t mean you’re a bad prospect for lending. It just means you don’t meet certain criteria. So come and talk to us.

Debra Chantry-Taylor 18:22

Fantastic. Well, thank you so much for sharing that thing. Thanks for the three tips. Look forward to seeing you again soon.

Sarah Lochead-MacMillan 18:26

Thanks, Debra.

Debra Chantry-Taylor 18:27

Thanks again for joining us some Better Business, Better Life with me Your host Debra Chantry-Taylor. If you enjoy what you heard, then please subscribe to this podcast. And let us help you to get what you want out of business and life. Each week, we release a new short episode which will give a success story and three takeouts to put into action immediately. These will help you take your business from good to great. The podcast is also supported by free resources, templates and useful tools, which you can find at DebraChantry-Taylor.com. I am a trained entrepreneur leadership and business coach, a professional EOS implementer and an established business owner myself. I work with established businesses to help them get what they want. Feel free to contact me if you’d like to have a chat about how I might be to help you. Or if you’d like to join me as a guest on this podcast. Thanks again to NZ audio editors were producing this podcast. See you on the next episode.