The worldwide Covid-19 pandemic has been in the news and at the forefront of attention over the last few months, yet the true impact and implications are still unknown. World of Open Account (WOA) recently surveyed its global professional community to get a picture from the broad-based membership on the impact of COVID19 on the receivables finance and associated industries.
“As far as we know, this is the only survey that has been made of the global open account business community, so the messages are important for the industry to know and understand.” said John Brehcist, WOA.
The survey looked at the impacts and effects experienced, how businesses have reacted and what they see for the future. It was probably to be expected that there would no “one size fits all” set of responses, but the range and nature of the reactions was certainly interesting.
TFG heard from John Brehcist who analysed the responses and Mark Mandula of United Capital Funding who reviewed the outcomes and participated in the WOA Webinar.
John Brehcist, World of Open Account (WOA)
Mark Mandula, United Capital Funding
What is World of Open Account (WOA)?
World of Open Account (WOA) is a widely acclaimed and respected international professional community of factoring firms and working capital leaders. The Open Account industry; “buy now, pay later” drives economic activity and is a key contributor to global growth. Led by Erik Timmermans, it is a vibrant, collaboration-based, digitally-driven organization that focuses on innovation and knowledge.
What actions has WOA undertaken in response to the COVID-19 pandemic?
One of the many ways WOA has promoted and nurtured the open account industry is to periodically conduct surveys with its members on topics that are timely and relevant to the commercial finance and factoring industries. There is, of course no more relevant issue confronting the open account industry today than the current global COVID-19 pandemic.
What were the key findings from the WOA COVID-19 survey?
WOA took the initiative to survey members, partners and industry leaders in June 2020 about how the virus has affected performance of factoring and commercial finance firms globally and this article presents insight into the survey results. Copies of the entire survey can be seen on the WOA comprehensive website.
WOA also held a global webinar discussing the results of this survey on June 16, 2020 and the entire webinar can also be accessed on the WOA website at no cost.
The WOA survey was conducted in June 2020 by an independent research group and asked ten questions to a global group of factoring, commercial finance firms about the impact of the current COVID-19 pandemic on their businesses. The questions were structured in four primary areas:
- How the COVID-19 pandemic has impacted day to day operations of their enterprises,
- The impact of the COVID-19 pandemic on the processes used to operate their businesses,
- The impact of COVID-19 on personnel and staffing levels in their businesses,
- And future expectations and thoughts on how the current pandemic will change the open account industry for the near and long term.
We have presented graphic results for each of the questions posed in the survey below and will provide some short insights about the results for each in this article.
COVID-19 impact on businesses
As can be seen in the chart above, the COVID-19 pandemic has greatly impacted open account firms surveyed. More than 2/3 of the firms have felt either a high degree or great impact and only a very small [less than 5%] felt no impact at all. Cleary the COVID-19 pandemic has caused significant upheaval in the open account industry and is likely to continue to ripple through the industry for some time to come.
The results of this question are interesting and mixed. While a significant number [about 50%] of the firms surveyed indicated that the COVID-19 pandemic has had some impact of the volume of business they are currently doing, a surprising number of firms have felt little or no impact [yet] on volume due the COVID-19 pandemic. So while the impact on volume is significant, the effect has not been evenly spread across the open account industry.
Impact on business processes
This question switches gears and asked open account firms if the current COVID-19 pandemic has impacted certain processes on a day-to-day operational basis. For most of the open account firms surveyed, the virus has meant an increase in some of the operation activities [like collections, credit analysis, due diligence, etc.] performed by the factoring and commercial finance firms.
Impact on Open Account firms (e.g. staffing levels)
As can be seen in the results above, most open account firms have maintained their staffing levels and unlike what has occurred globally in many other industries, they have not had to lay off employees due to the COVID-19 pandemic. This speaks to the resiliency of the open account industry and is one of the bright spots on the survey results.
Consistent with the results of the last question, nearly all of the open account firms surveyed said that they have not had to reallocate staff to different internal roles in the businesses due to the COVID-19 pandemic. This again is another one of the positive results of the WOA survey on open account firms.
COVID-19 and technology
Another excellent question and the survey results are fascinating. There is no question that the current COVID-19 pandemic has had a significant impact on the way open account firms operate and serve their B2B clients. Almost all open account firms said that they had to change the operation of its firm either greatly or to a high degree. The shift to working remotely and the utilization of more and different technology is one of the key findings of the survey.
The current COVID-19 pandemic has caused owners and employees to have a mixed set of opinions about the future of their open account enterprises. While many surveyed felt that the impact was negligible, an equal number who responded felt just the opposite and that the virus made them greatly or concerned to a high degree. This wide array of responses perhaps also reflects the uncertainty about the future and when a COVID-19 2.0 wave could emerge.
COVID-19 versus 2008 Financial Crisi
This question and the survey results provide insight into the fact that just about all open account firms asked believe that the impact of the COVID-19 pandemic will be significantly larger than the one felt during the financial crisis and recession of 2009. Most believe that the impact will be unprecedented and could have lasting and negative consequences for the firms that do not rapidly adapt in this very uncertain and unsettled era.
The survey also asked open account industry firms to put look into the “economic crystal ball” and make some predictions about the overall state and future of general business conditions and when a recovery will occur. Nearly 40% of the industry leaders who responded believe that a recovery from the current economic downturn will not happen quickly and take about a year for the global economy to bounce back. 60% of the open account firms felt that the recovery will take a year or more to occur. These results if accurate signal a very painful and risk-laden environment for factoring firms and the SMEs they serve.
Are we going into a new normal?
The results of this question are profound and merit careful attention. The overwhelming majority of the open account firms who responded felt that the adaptions within their businesses due to the current COVID-19 pandemic will be permanent in nature and scope. Clearly open account professionals truly believe that when the pandemic is over, there will be no going back to the “good old day’s pre-COVID-19”. Change is the only constant in any industry and open account firms seem to clearly understand that if they want to remain competitive [or even in business] they need to quickly adapt to the new “normal”.
This has very interesting implications on how open account firms will utilize additional technology [AI, RPA, Blockchain and others] to accelerate the digitalization of the industry and to reduce cost/improve productivity and efficiency. This also leads me to believe that remote operations and the need to quickly improve the quality of tools used to market, reach and communicate with prospects and client has to occur. Tools like Zoom and others once considered unnecessary or a nuisance will take on even more important role to enable the factoring industry to stay in touch with and on top of the client/debtor communication process. The need to embrace advances in technology and the future role that they will play in the open account industry will make for challenging times for all in the near and long term open account universe.
Professionals who completed the WOA Survey also had the opportunity to express free form ideas at the end of the survey. They are presented here and echo the need for open account firms to plan now and make the necessary changes if they want to remain viable and relevant in what will clearly be a very different new “normal” future for SMEs on a global basis.
The Survey results are summarized in the last several slides, presented below.