In this edition of our spotlight series, we asked Panos Papatheodorou, FCI Executive Committee Member and Chair of the Education Committee, to answer a few questions so you can get to know him better.
How does factoring help businesses grow?
Working Capital Management is a crucial priority for any business operations to achieve growth. The main components of working capital management are Trade Receivable and Payable Accounts.
Factoring services, offered mainly by Banks and other non-banking Financial Institutions (including trade finance Funds), substantially reduce the amount of working capital locked in the form of trade receivables from B2B Sales on credit.
Through Factoring, Clients can extract much-needed liquidity for their day-to-day operations. They can also finance their business plans using the realized past Sales recorded as receivable assets on their books and owed by their domestic and international business buyers. The scope of Clients that can thus benefit from factoring includes companies of all sizes that engage in B2B trade transactions. Then, in addition to instant liquidity, factoring, as a “one stop shop”, provides Clients with the following valuable services:
- Management of the factored ACs Receivable, matching them with the Buyers’ relevant ACs Payable
- The two Factors system for Cross Border transactions (imports/exports) through the FCI’s new Edifactoring 2.0 business platform
- Collection of Accounts Receivable, credit control of the buyers, and in the case of non-recourse factoring, the credit risk coverage in the financial inability of Buyers to pay.
Last but not least, it is worth highlighting the benefit to the factoring Client’s leverage position and an overall reduction in the size of their liabilities. This helps improve the Client’s financial performance and business growth expectations.
What are some of the issues/trends/challenges facing the factoring industry currently?
The effects of the covid 19 pandemic continue to influence global markets. Supply chain disruptions worldwide were further exacerbated by the impacts of Russia’s invasion of Ukraine on the supply of critical commodities and the ensuing inflation.
Despite the challenges of the last three years, the Factoring Industry proved resilient and continued to be a key source of much-needed liquidity across various sectors of the economy. Due to Factoring Industry’s increasing visibility, new large geographical regions, such as Africa, are already systematically launching factoring and setting up the proper rules and regulatory directives.
Moreover, the Industry is investing heavily in new technologies and innovations, such as blockchain technology, “distributed ledger Tech”, new electronic marketplaces for trade transactions, receivables exchange platforms and other FINTECH automated structures and solutions. During the covid-19 pandemic, businesses, either on their own or collectively, learned to communicate and transact in different ways than in the past, driven and supported by new innovations and technological advances that are now challenging the old rules, practices and policies.
To remain competitive and survive in this new world, businesses must invest in Technology and acquire new skills and knowledge that fit their functional structure. Through its outstanding performance in this challenging environment, the factoring industry proves that it has a vital role in trade finance markets now and in the future.
How do you feel about the digital revolution in the Industry
Digital evolution (allow me to say revolution) in the next few years will change how business entities and individuals communicate, partner, learn, transact and work.
A case in point is the trend that sees major global players in cargo transportation and logistics partner with well-known tech firms. Logistic companies invest heavily in tech across warehousing, inventory automation, tracking shipped goods etc. I believe it’s only a matter of time before we see them expanding in supply chain finance, either through an alliance with financial institutions or even by themselves in some cases.
All will have to redefine how they do business and invent new mechanisms and models in light of the new “go and no-go” imperatives (duly regulated) imposed by the recent global transformational process for a digitized world.
In the new digital reality, businesses, institutions, and individuals must develop capabilities and adjust their practices to remain competitive in this new environment.
I do not doubt that factoring and the receivables finance industry will be transformed into an entirely paperless and digitized services operation, where all documentation, record keeping and execution of their assets is done electronically.
Do you think there is a more significant push to go digital post covid and where do you believe the following considerable change or development would come from
Everybody understands that the covid-19 pandemic was a catalyst for change in how businesses and individuals communicate and transact.
What followed was a revolution in how firms and people trained to communicate, inform, manage, learn, make decisions, control and audit in a somewhat different and previously unknown manner for most. This was much like going “back to a digitized future” across the business and social sphere.
Whatever the following significant challenges, I am confident this will be addressed in the medium term once more by Technology through the fast-evolving development of Machine learning within the broader field of artificial intelligence.
Do you have any pets?
Yes, I have Silvio, my cat, who is 14 years old and very loyal to the family. I also have a German Sheppard, 1,5 years old. His name is Thunder, given to him by my young granddaughter Sophia.
Do you have any hobbies?
Yes, I do. I play the piano, enjoy hiking, and cultivate and grow vegetables and herbs for “family consumption”. I also enjoy travelling and reading, especially history.
What was your first car?
Volks Wagen Beatle 1.300 cc (1978), second hand.
We want to thank Panos for letting us get to know him a little more. Next week we will interview more of our Executive Committee, so stay tuned!
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