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FloFunder launches invoice trading platform

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8th Nov 2016
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An innovative match-making platform opened this week that lets accountants offer client businesses seeking cashflow finance a way to sell invoices to the firm’s other clients.

The new service is called FloFunder, and is offered by online payments outfit PeerPlay. The concept grew out of a situation practitioner David Ireson-Hughes encountered a couple of years ago.

”The bank came to see a client of mine who was looking for cashflow finance,” he told AccountingWEB. “It was a very new, fast-paced international business. It was a bit quirky, but had a £600,000 monthly turnover with a pretty good profit line. We knew this would be successful.”

The bankers thought otherwise, responding that they “didn’t have the appetite for this kind of business”.

Another of Ireson-Hughes’ clients was sitting outside. “I told him, ‘You won’t believe the conversation I just had’. After explaining the situation the client said, ‘Give me a moment’ and called a couple of his friends. He came back and said, ‘We’ll fund it.’

“They essentially became the cashflow financiers for my other clients.”

The more he looked at his relationships with bankers and alternative financiers, the more he felt “it was only them benefiting out of the relationship with heavy fees and finance charges.”

For the past 18 months, the team has stayed “off the radar”, building and testing the platform with test partners. He approached another contact, Michael King, who used to be CEO of payment services company Swift. With the help of another early investor they fleshed out a proposal for a new kind of web-based payments platform. This attracted a government smart award from InnovateUK that helped to fund development of FloFunder.

Ireson-Hughes likens FloFunder to a “closed online dating agency that brings together clients with cashflow requirements and clients who have cash available” within the same practice’s orbit. A business can upload an invoice from Xero to FloFunder, and buyers can place their funds via the platform into a segregated client account held at Barclays.

“It’s all completely automated,” he said. “Buyers can acquire invoices digitally for a fixed price. There are no auctions. If there’s money out there the system will grab it and make it available to the seller.”

flofunder

Those offering finance can choose a low, medium or high risk profile and reap returns of 6-18% on their investment, he added.

FloFunder is being offered as a “whitelabel” system that practices can link into their practice websites. It currently integrates with Xero, but negotiations are in hand to open it up to other accounting platforms.

Data isn’t just exchanged between the funding platform and accounting engine, however. FloFunder will also draw on standing information in the cloud accounting system to compile a risk profile for businesses seeking funding based on their invoicing and collection histories.

“That sets your profile, which is entirely different from the usual credit scores. This is live data coming through,” said Ireson-Hughes. “It also talks to Companies House to ensure the end client is a valid entity.”

As an online, on-demand platform for selling and buying invoices within a closed community, FloFunder posed some regulatory challenges for the Financial Conduct Authority, which does not have a category for this type of trading system. But no financial guidance is delivered through the system and while accounting practices can refer clients to the independent platform, they are not parties to the transactions. As a result, FloFunder has been given liability clearance from CIMA and other professional bodies, Ireson-Hughes said.

 PeerPlay chairman Michael King told AccountingWEB that FloFunder can “make the accountant the hero”.

“It liberates cashflow for business clients and offers high returns on their money to those with cash to invest,” he said. “Think of the 275,000 businesses that were liquidated in the past year because they didn’t have access to alternative funds.”

As a practitioner himself, Ireson-Hughes said FloFunder supports some of the shifts that have been taking place as cloud accounting eats into other elements of the accounting workload.

At his firm, he said, “We’ve always been plugging things in to become more like an external finance director. We advise clients to talk about insurance issues, pensions, auto enrolment and so on. It’s got to the point where people treat us a bit like the traditional bank manager, to help move the business forward rather than helping with day-to-day bookkeeping.

“You can’t keep doing all the jobs you’ve always done. Clients expect more.”

Replies (6)

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Paul Layte
By Paul Layte FCA
09th Nov 2016 06:34

Great idea and a much needed alternative to traditional finance.

I think accountants here can play an even greater role with finance of this type. Certainly if I was the lender and looking for strong returns in the medium - high risk category I would welcome an accountant monitoring the company proactively. By which I mean Cashflow forecasting, general liquidity monitoring, debtor chasing etc etc I would likely contribute to the cost of that also (as the lender) because that helps lower my risk and boost my return. One of the many ways I see the client/accountant/funder super trio working to the benefit of all.

@flofunder - let's talk

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By jon_griffey
09th Nov 2016 09:45

A very interesting concept. I would be interested to see how the business model works. However I would be very wary of my clients lending money to other clients with me in the middle. There seems to be a very high risk that when a debt goes bad, the finger gets pointed at the accountant.

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avatar
By raybackler
09th Nov 2016 11:50

I have had a run through the product with an online demo a while ago and I want to see what the finished product is like before commenting. The concept is great. I think most practices will have good clients in need of funds and cash rich clients looking for better returns.

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Paul Layte
By Paul Layte FCA
09th Nov 2016 11:56

@Jon - I think you mis-understood the intention of the client bit. Whilst I can't speak for flo my interpretation was that 'your/our' clients would generally borrow from 'funders' which are not clients even if their identity was available in the funding chain (which generally it is not). Of course they potentially could be clients if they were HNW individuals / flush companies so your scenario is not impossible but I am not sure to what extent that would be visible anyway as a lot of other similar platforms act as the middle man so the end lender / funder are not directly aware of each other so to speak which is how I am assuming flo would do it....however I don't know for sure as not talked to them yet but would assume it works like any bank. My deposits are my next door neighbours car loan (assuming we are at the same bank) to some degree.

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blue sheep
By NH
09th Nov 2016 13:44

this is what the website says -
"The FloFunder Platform rapidly matches buyers with sellers within their common accountancy practice"
Seems to support Jon's view

Thanks (1)
Replying to NH:
By jon_griffey
09th Nov 2016 14:46

What I see happening is a client saying to the accountant "I am looking to fund X Ltd's invoice and as you also act for X Ltd what do you think?" There would be an expectation that the accountant would have their finger on X Ltd's pulse and be able to say whether it is a good bet. (i) you say yes, and then you risk a PI claim (ii) you say no, and X Ltd gets upset (iii) you say nothing and they go ahead and you end up with the complaint 'why didn't you tell us'. You can't win.

It looks like a very interesting concept, but I would rather have clients look for funding from the world at large, not from my pool of clients. It's too close to home.

Thanks (1)