Article

09.04.2018

Cash flow dipped? Prioritise your payments.

All companies experience highs and lows, especially in terms of liquidity. However, even if you are struggling with cash flow, you must continue to honour your contractual commitments. When it comes to settling with your creditors, it is in your best interest to group them considering two factors: possible fines and your strategic needs.

Several events can temporarily trigger cash-flow problems: a large unexpected payment, a contract which you were banking on falling through or a big customer being late in paying. Above all, it is important not to "play dead" when you find yourself in this situation. It is important to remember that you are also dealing with your creditors and some will not "forgive" you for any late payments. Stay in control to prevent this one-off event from becoming a bigger problem.

Priority n° 1: your tax and social security debts

This may seem obvious, but your overriding priority must be the State, i.e. your commitment to paying VAT, social security and tax. That is because you can quickly be caught up in a snowball effect if you miss payment deadlines, with your debts spiralling out of control. Be aware of hefty surcharges, fines and default interest. Indeed, if your company does not respect its tax and social obligations, you will soon find that public organisations have rather dissuasive recovery methods in place. 

Beware of the penalties

For example, if you are late in paying your social security contributions, you will be subject to an increase of 10% of the amount due, with default interest of 7% per annum. Please also be aware that the NSSO can seize your company funds and that the tax authorities have the right to seize your bank accounts, to contact your customers to recover debt, or to hold you responsible as a manager under joint and several liability.

An accessible solution: payment facilities

In order to avoid this, there are many options available to you in terms of establishing a repayment schedule with these public institutions. Your company should ensure it takes advantage of these. Again, the more proactive you are, the easier it will be to negotiate a payment facility. The first step is to contact the organisation in question and propose a realistic repayment schedule. Even though the conditions vary, you will usually have to make a first payment before spreading the balance over a longer or shorter period. Even if you are fined for late payment, you may, under certain conditions, be entitled to a reduction or an exemption if you adhere to the conditions of contract.

Priority n° 2: your key creditors

After addressing your situation with the State, you must turn your attention to your strategic partners, i.e. those who have a decisive impact on the smooth running of your business on the basis that, if you tarnish the business relationship with your main suppliers, the situation could go from bad to worse. After a first screening to identify the most urgent bills and priority creditors, draw up a plan of action in line with your current and short-term cash-flow situation. Identify the debts you can pay immediately and in full. For the others, the right approach is to contact your partner.

Clear and controlled communication

Your goal should be threefold: first, demonstrate to your creditor that you are proactive in dealing with your cash-flow problem and that you care about your business partners. Then you must confirm that your situation is temporary and circumstantial. Finally, keep in mind what you want to achieve, make a reasonable proposal and be prepared to negotiate a satisfactory solution for both parties. For example, you can ask for a monthly payment plan in return for financial compensation (default payment interest, etc.), a formal commitment to long-term collaboration or an increase in order volume.

In any case, in order to stay afloat, you will understand you have to: act quickly, communicate clearly and negotiate a staggered payment plan.

Article

30.04.2020

#StrongerTogether Biogazelle plays part in fight against coronavirus

Biogazelle is playing a huge role in the shared battle against the coronavirus. In record time, the Ghent biotech company has developed a test for detecting infections.

Since 2007, Biogazelle has offered support to the pharmaceutical and medical industries. The company develops revolutionary techniques for tasks such as detecting new illnesses, multiplying tiny amounts of genetic material to create analysable samples.

“In just 10 days, we have come up with an extremely sensitive coronavirus detection test,” says CEO Mieke Van Acker. “Our speed and flexibility have amazed the big pharma companies. We started with 2,000 tests a day, and that number has already shot up. But we are still a long way from our limit.”

Unprecedented collaboration

To drive capacity even further, Biogazelle has invested in a robot. “Very soon this will automate certain manual operations,” the CEO explains. “Inactivation of the virus is currently done manually. By automating this step in the process, we will significantly increase efficiency.”

Biogazelle is part of a coronavirus consortium established by minister Philippe De Backer that also includes three large pharma companies and a university. “We are joining forces to further increase the testing capacity in our country,” says Mieke Van Acker. “Such a collaboration is unprecedented.”

Every link is crucial

According to Van Acker, every link in the chain is equally important. “We ourselves are supported by Ghent University, UZ Gent and the Flemish Institute for Biotechnology. We have help from volunteers, and industry colleagues have also offered test apparatus.

But the financial support from BNP Paribas Fortis is as valuable as the scientific aspect.” This financial support consists of a credit line and leasing agreement. Biogazelle will also make use of BNP Paribas Fortis Factor, a series of solutions aimed at optimising work capital and the resulting financial needs.

Article

09.04.2019

Green light for new law for companies and associations

From 1 May 2019, new legislative rules will apply for Belgian companies and associations.

On 28 February, the Belgian House of Representatives adopted a bill for a new Code on Companies & Associations. The aim? To modernise the current legal framework, align more closely with reality and help make Belgian companies more competitive in relation to their European colleagues.

High impact

The aim? To modernise the current legal framework, align more closely with reality and help make Belgian companies more competitive in relation to their European colleagues. The new legislation will enter into force from 1 May 2019 for new companies and associations and 1 January 2020 for all existing companies and associations (unless these opt in before that date). Mass conversion is likely to occur between 2020 and 2023. All existing companies and associations must use this period to review their articles of association and legal status.

Delay

The new rules would normally have entered into force on 1 January, but the bill's adoption was delayed by the government shenanigans in recent months (Prime Minister Michel submitted his government's resignation on 18 December 2018 after a Green-Red vote of no confidence, ed.). Although the new legislation has been approved by the House, it hasn't yet been published in the Belgian Official Gazette currently. Also, the implementing decrees will take a little longer. Nevertheless, the new rules will apply as of 1 May this year.

Article

26.10.2018

How to automatically get the best exchange rate

Companies working with several currencies often want to avoid exchange rate risks and administrative hassle. That is why the bank has come up with a behind-the-scenes solution: the 'embedded FX' service.

Embedded FX? You don't even need to remember the name, because the system works automatically, without you even having to think about it. FX doesn't stand for Hollywood-style special effects, but for Foreign Exchange, sometimes referred to as Cross Currency. You are guaranteed to come across this at some point if you make international payments, since they are not always executed in the currency of the debit account (referred to as 'mono-currency payments'). Sometimes, the currencies of the accounts the payment is being debited from or credited to may not be the same. These are FX payments. During such payments, an exchange takes place: one currency is sold and another bought, without you having to lift a finger.

The volumes on the FX market might be greater than you'd think. To put it plainly: they are enormous. Every day, more than 5 trillion American dollars are traded. That is 5000 billion American dollars, more than the volume involved in global equities trading...in a single day. The FX market operates day and night, and only closes over the weekend from 10 pm on Friday until 10 pm on Sunday.

Wim Grosemans (Head of Product Management Payments and Receivables at the BNP Paribas Cash Management Competence Center):

'On the FX market, banks essentially play the role of a wholesaler: they buy and sell currencies on the international market, and then sell them on to the customer with a mark-up. BNP Paribas is one of the biggest players, ranking among the global top ten. There is no official market rate in this over-the-counter market. Each bank determines the rate at which it wants to buy and sell currencies itself. Unofficial market rates can be found in publications from a number of public institutions (such as the European Central Bank) and private organisations (Reuters, Bloomberg etc.). These are based on the average rate offered by a number of major banks.'

The rate is always determined per currency pair, for example the euro versus the American dollar: EUR/USD = 1.1119. The most traded pair is EUR/USD, which represents 25% of daily trade. Second on the list is the pair American dollar/Japanese yen

(USD/JPY) with 18%, with British pound/American dollar (GBP/USD) coming in third at 9%.

Alwin Vande Loock (Product Marketing Manager Payments and Receivables at the BNP Paribas Cash Management Competence Center):

'As for the rate, banks offer a number of options. The rate can be a live market rate that is continuously being updated. The EUR/USD rate, for example, is adjusted more than 50 times per second. Another option is a daily rate. In this case, a rate is offered that will apply for a certain period.'

For many companies, all of this hassle with exchange rates is a real headache. Too complex, too expensive in terms of administrative costs and too many exchange rate risks. For those customers, banks have a solution: embedded FX.

Wim Grosemans (Head of Product Management Payments and Receivables at the BNP Paribas Cash Management Competence Center):

'When you make a payment in a currency you do not hold an account in, the bank will immediately retrieve a good exchange rate from its colleagues in the dealing room of the Global Markets department. The rate is usually confirmed within one hour after the customer has sent the payment. Unless large amounts are being transferred, the entire process is automatic. The IT systems used are much more efficient than they were just a few years ago, meaning that the bank is less exposed to volatility and can offer its customers a competitive rate. Embedded FX is an efficient and simple alternative for anyone who doesn't want to hold accounts in different currencies and run the exchange rate risks that entails. For the customer, it no longer matters what currency they use: the process is exactly the same. What's more, it gives them peace of mind, because they know that they'll always get a great rate.' 

Article

12.09.2018

Working capital: far more than just an accounting term

Working capital, also known as net operating capital, presents a picture of the operational liquidity of a business. But there is more to it than meets the eye.

The success of a business actually depends to a significant extent on how it deals with its working capital needs.

The difference between working capital and working capital needs

Within the financial analysis, working capital is just one of the indicators that present a picture of the operational liquidity of a business. It not only affects general management, but also the access to bank credit or the valuation of the business, for example. This is calculated as follows:

Equity capital and other resources in the long term - fixed assets

This allows you to see whether sufficient long-term funds are available to finance the production chain. Where there is a positive result that is indeed the case, whereas with a negative result it is actually the production chain that must safeguard the long-term financing.

It is therefore useful to calculate the working capital needs as well:

Current assets (excluding cash) - current liabilities (excluding financial liabilities)

The result shows the amount the business needs in order to finance its production chain, and may be both positive and negative:

  • where working capital needs are positive, the commercial debts no longer cover the short-term assets (excluding the financial). In that case, a business can rely on its working capital. If this is insufficient, it will need additional financing for its operational cycle in the short term;
  • where working capital needs are negative, a business can meet its short-term liabilities without any problem. Nevertheless, it is advisable to reduce working capital needs (further).

In short, working capital presents a picture of the operational liquidity of a business, whereas working capital needs represent the amount the business needs in order to finance its production chain.

In other words, it boils down to limiting working capital needs as far as possible, thus increasing liquidity. This is crucial, especially in times of economic or financial difficulty. After all, customers tend to pay later then, while your stocks are increasing and your suppliers are imposing stricter payment terms. As a result, more and more working capital gets 'frozen' in your operating cycle, precisely when circumstances make it more difficult to attract additional financing.

Conclusion

Optimising working capital is not only a question of long-term considerations. In the short term, too, the business can release cash that is not being used optimally, or is being used unnecessarily, more specifically in the purchasing, production and sales processes within the operating cycle.

The working capital and the working capital needs must, above all, be geared effectively to each other. The working capital needs must be structurally less than the working capital itself, preferably with an extra buffer. However, there is no mathematical truth regarding the amount of working capital and working capital needs. Sector, activity and business model can affect this, for example.

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