Vladimir Topalovic, Head of Risk and Analysis at Gamico Faktoring – Factoring is an important tool whose development is accelerated by digitalization

Vladimir Topalovic, the Head of Risk and Analysis at Gamico Faktoring from Belgrade, talks about the advantages of factoring, who this service is meant for, but also how useful digitalization has turned out to be in this area of business and which innovations and which protection Gamico Faktoring implements.

What are the advantages of factoring as a financial service?

Factoring still seems to be a mystery in the local market, and it should be a tool for every business entity that sells goods or services at deferred payment. The main advantage of factoring is that you can charge the issued invoice with the date of the issuing, even though the invoice itself is dated to 45 or 60 days ago, for example. It is very important to know that the procedure of getting a non-binding offer is very simple. For that reason, I recommend to companies to prepare themselves, through simple application, for a potential sudden period of non-liquidity, where they would have pre-defined financing conditions with a certain factoring house or bank, whereas the factoring itself can be realized when the need arises. The advantage of this kind of arrangement is that, until you realize the factoring itself, there are no costs, including the costs of the processing of the request. Furthermore, factoring does not burden the company`s balances in terms of credits, it is much quicker than any credit arrangement and does not require a long time procedure. The repayment period, concretely, at Gamico Faktoring, can be one to three days within the submission of the financing request. With the realization itself and the change of the creditor, you entrust the billing to your factoring house, whereby your operations are eased additionally. In these areas, it is widely believed that, by changing the creditor, the risk of the billing is transferred to a factoring house or a bank. However, those who use this service should know that, in the Serbian market, 98% of the factoring agreements are agreements with recourse rights, where the seller of the claims remains responsible for the billing, even after the claims are sold. In order to enable the clients to reduce the risk of claims collection to a minimum, we have included a third party in the factoring business, insurance companies which insure claims. This way we provided a new financial product, which is factoring with claims insurance, whereby the client gets the option of collecting their invoice immediately, but also to transfer the risk of billing to the third party.

Who opts for factoring or should do so? Who is it meant for?

Large business systems use this service a lot, but I believe that the biggest benefit is to small and medium enterprises and companies that have just been founded. The essence is that most young or recently founded companies are practically unable to get financing through a credit, one of the most common ones in our market. The reason, of course, is that banks demand from clients to have a certain number of years of business operations behind them so that they would be able to examine the client`s operations and thereby estimate their credit ability. That`s not a condition in factoring. The reason, of course, is the subject of factoring, namely, who the goods or the services are being sold to. If the purchaser has a good credit rating, the provider of the factoring service fully relies on the debtor itself, as per the invoice, whereas the credit rating of its issuer is not considered in estimating the credit ability. What can act as an obstacle is that the users themselves are not well informed, not knowing that it is they that this service is primarily meant for. The essence lies in having a quality buyer.

Is digitalization contributing to the development of factoring in Serbia?

Digitalization accelerates the whole process and thereby helps the development of factoring. The information for estimating the credit rating are more available, from basic information through public services, such as APR, NBS, Knweb and courts` portals, to modern services which provide and unify all the information important to a company`s operations. Whether the company`s account was blocked, for which amount and for which period, whether the real estate the company owns is under mortgage, whether there are active court processes, the number and the basis of the issuing of bills of exchange, persons related to the company... Until now, all this was only available in our country.

However, in our many years of operations, we have been encountering more and more companies which are mostly export-oriented. As in the factoring situation, we become the new creditors. We have realized what kind of problems our clients experience if they export goods or services to foreign markets, while not being able to demand advance payments, or their payment periods are simply dictated by price calculations and cost-effectiveness of the business. Of course, it is necessary to have information about the credit rating of the foreign purchaser, about which collateral to use to best protect one`s claims, whether to ask a banking guarantee, who to turn to in case there`s a dispute, considering the jurisdiction in foreign legislatures... All these are problems that exporters face daily. Even when you manage to organize all this, there`s a problem of financing the entire process, which is extremely expensive.

In that situation, we have the best implementation of digitialization in business, especially in the times when travel is made difficult due to said epidemiological situation, the fact that foreign fairs are not held and the fact that it`s impossible to establish direct personal communication with foreign purchasers.

We`ve found the solutions through the service we provide, that is, factoring, in cooperation with the world credit rating agencies and insurance houses in the field of insurance of claims, as well as the financing of business.

In practice, it works like this: It`s enough to have an interested buyer, or several buyers, from abroad, with the basic data on the future claim and the repayment period. Based on this, Gamico Faktoring can look up for you up to which amount you can sell your goods or services at deferred payment, for a concrete buyer, how much it would cost you to insure such a claim (the risk of billing is transferred to the insurance company) and the price of a premature collection of such an invoice through factoring. This means that, as soon as an interested buyer appears, you can entirely plan your operations for the future period, while also solving the primary realization problems. At the same time, the company saves money that it would otherwise spend on frequently expensive travels abroad, which do not always lead to the realization of business. In that situation, it is the digitalization of the entire procedure that is crucial. First, the process is very quick, and most importantly, available and reliable. The credit rating of the foreign buyer you get is such that it doesn`t only provide information about the buyer itself, but also protects your claim.

What Gamico Faktoring wants to implement as a new feature of its business is electronic signing of agreements and the accompanying documentation, confirmation of the status of the claim by email, sending of notifications of the taking over of the claims to registered emails. This is useful for the factoring company and its clients alike. It removes the need for large amounts of printed documentation, snail mail and, finally, archiving. We save time, but also preserve the nature as much as we are capable, by using less paper and printing toners. We want our clients to see us as partners in a business and we try to establish friendly relations with everyone. On the other hand, due to the current situation with Covid-19, but also for the reasons of efficient time management, the process of digitalization enables us to carry out the operating part of the job with a minimum of personal contact.

Are there cyber crime threats when it comes to factoring?

So far, we have not had cyber attacks that could jeopardize us. Of course, with the implementation of new services which are exclusively digital, we are also working on data protection, in order to prevent this. We are trying to have every innovation first approved by our legal team, but also technically protected, so that we would not cause damage to ourselves or our users.

In what way are the data protected?

Above all, we don`t use public computers for business activities. We pay special attention to mails with suspicious content, which we immediately report to our IT support service. When sending confidential information, we use protected channels, whereas special attention is paid to antivirus and firewall software. Double checks are mandatory if there are requests for a change of payment instructions, which could be one of the most frequent cyber fraud attempts.

How has coronavirus affected your field of operations?

The impact of the pandemic and Covid-19 on the economy is still quite a bit of an enigma, just like the virus itself. Economic stagnation must certainly reflect on all participants. It is still unknown how it has affected the factoring industry. On one hand, there can be an increased number of requests for the financing of clients, due to an overall drop in liquidity, but also the increase of credit risks and billing risks on the other hand, which in turn leads to a lower number of financial transactions, which are at the same time carried out more carefully. The current situation is such that we are still not seeing any major changes that could jeopardize our business. We expect the first indications of a larger crisis as soon as in early 2021, but we are trying to meet the upcoming wave by properly dispersing the risk and with as little loss as possible, for both us and the clients.

Gamico Faktoring d.o.o. Beograd

Gamico Faktoring Belgrade

Gamico Faktoring

Vladimir Topalović

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