Building a lending business & unlocking scale with Open Accounting & eSync

With a small team, 70 expectant customers and a reputation built on excellent customer service, the company needed a software solution that would help them scale their new proposition quickly and cost-effectively. Step forward eSync: our automated lending facility type, powered by Open Accounting.

Context

Our client had recruited an experienced ops director from the invoice finance industry to build its new lending business. The director would be supported by two existing employees, who would split their time between delivering the new lending product and the company’s other tax, credit and accountancy services.

The lender had four key requirements:

First: the new system must offer a smooth borrower experience to encourage customers to take up the invoice discounting product. Dancerace was the natural choice, explains the company’s operations director: “Having come up against other lenders in the past that offer the e3 Client Access system, I knew that e3 was very easy to use from a client perspective.”

Next: reporting. “With scale in mind, I reached out to Dancerace because we were also going through the process of getting a back-to-back facility in place for the new lending business. Having previously worked on the banking side to provide back-to-back facilities for lenders, I knew that reporting and visibility of a lender’s ledger and what they’re lending against is very, very important,” says the ops director.

Third: expert support. Our client’s ops director had had a poor experience working with other invoice finance software providers in the past. “Support was a key consideration for us, on the basis that we hadn’t set up and run an invoice finance business before.”

Finally: our client needed to launch and grow their new lending portfolio with only three staff, keeping overheads and operational complexity low. Automation would be essential.

Solution

Dancerace’s complete, connected lending OS was the ideal solution. By implementing our c3 Backoffice Control and e3 Client Access systems, our client could launch and grow their invoice discounting facility simply, quickly and cost-effectively. Their secret to scaling their business would be eSync: our unique, automated invoice finance product type for borrowers.

eSync gives lenders factoring-style visibility on client ledgers, with the efficiency benefits offered by invoice discounting.

With an eSync facility, a borrower connects their accounting platform once via their e3 Client Access system. The lender can then ‘extract’ the borrower’s financial and management information whenever required, with no need for the borrower to manually upload ledger files. The lender’s c3 Backoffice Control system reviews the extracted data, automatically posts collections to the borrower account, and presents new items found in the borrower’s accounting system for the lender to approve or disapprove. All automatically, on a scheduled or ad-hoc basis.

For a detailed description of our eSync facility type, click here.

Our client runs its eSync invoice discounting facility on a continuous basis, with weekly reconciliation and payment processing. The lender uploads invoices to their clients’ accounting systems on their clients’ behalf, throughout the week. Each Wednesday, the lender ‘extracts’ all new ledger data from their clients’ accounting systems to their c3 Backoffice Control system. The system displays all new customers and other relevant schedules for the lender to review. Then, the lender makes payroll on their clients’ behalf, setting aside additional availability. If the lender wishes to dig deeper into their client’s Open Accounting data, they can do so in our Insights system.

Impact

Borrowers benefit from an effortless user experience. “Our clients don’t need to access Xero to understand their lending facility; they can do everything in e3. There, they’ve got an up-to-date picture of their ageing and the status of their account.”

Our lender benefits from a fast, simple and scalable workflow, with dependable data and no need for monthly reconciliations.

“Before implementing eSync for our clients, we were managing uploads and reconciliations for 60 clients every month,” explains the ops director. “The experience with eSync is miles apart. By removing monthly reconciliations, eSync saves us a massive amount of effort and means we’ve now much more time back as a team to do other things. Our accounts team can now focus on assisting clients with cashflow forecasts, planning, monthly management accounts, queries and troubleshooting. Reconciliation and keeping on top of an invoice finance system is now way down on the list of tasks. Before it would have been top three!”

This sense of pace is especially significant for our lender’s recruitment clients. “In recruitment finance, we need to do everything once a week to ensure candidates are paid. Our clients’ businesses are only viable if candidates are paid regularly. As soon as they miss any payment, then the name of that recruitment agency is muck,” says the ops director. “So, reliability and ensuring that payments are done on a timely basis is essential.”

Accuracy is key, too. “If a client’s accounting system is correct, you’re not going to make mistakes with their facility. Knowing that we're extracting data directly from Xero or Quickbooks means no-one’s going to add or remove a zero or anything like that.”

New horizons

Working with Dancerace’s Open Accounting technology and eSync product type has given our lender the ability and confidence to scale their new lending business.

“In future, all of our clients will use open accounting,” says the ops director. “Open Accounting and data extraction has been massively important to enable us to act quickly and scale, and will help us to grow quicker still in future. Once our back-to-back funding is finalised, this will open up the floodgates for us to go to market and generate as many new clients as we can.”

Open Accounting has opened up new horizons for lenders, says the ops director. “It sounds corny but it's true: you almost forget how much effort was required to run an invoice finance facility before Open Accounting."