Sidetrade, a French publicly traded firm that helps B2B firms manage cashflow and find fresh market opportunities with AI infused technology has released a tracking application that shows the volume and value of overdue invoices among the B2B customers it serves. See the image above. The data used by the tracker covers invoicing in the UK, France, Spain, Germany, Italy and the Netherlands. According to the company:
26 million invoices worth €54 billion B2B transactions have been tracked in several countries affected by the Covid-19 to analyse the payment behaviour of 3.7+ million companies. The outbreak was declared a global pandemic on 11th March 2020 according to the World Health Organization. Source: Sidetrade, based on Unpaid Invoices 10+ days overdue. Updated weekly from 1st of January 2020.
Right now, Sidetrade is not providing an industry by industry analysis but according to Dave Turner, CMO Sidetrade, a preliminary analysis suggests that while hospitality, travel and elements of retail are obviously severely impacted, other sectors of the economy are not faring well either.
As can be seen from the snapshot image, the UK is particularly badly hit but then UK businesses have never been great at managing receivables. I asked Turner if they have data for the US and while there is some, Sidetrade's data scientists are not confident the data is sufficiently representative and therefore are not releasing a tracker for the US for the time being.
As I've said before, the last 30 some years have been characterized by short term thinking where the emphasis has not been on building for the long haul but rather paying back investors as quickly as possible. That's fine when things are going well but disastrous when a crisis of the kind we're all experiencing comes along. To make matters worse, Turner says that:
Cash collection is one of those functions that's never left the office. All too frequently, we see customers who work on an ad hoc collection of spreadsheets. It's not scientific and doesn't help customers plan. Now, those offices are closed so what do they do?
It's a good question and one for which Sidetrade thinks it has a good answer. Sidetrade is a SaaS company with a subscription model. According to the company's recent statement to investors:
In an unprecedented period of uncertainty, Sidetrade has already finalized several budget scenarios in order to test its financial solidness, faced with the impact of the Covid-19 pandemic. Given the severity and scale of the crisis to date, Sidetrade is making extremely conservative hypotheses to construct a “crash test” scenario and adjust investments accordingly. Here are Sidetrade’s current business assumptions:
- Drastic reduction (67% on average) in new subscription contracts (new customers) during the first three quarters of FY2020 vs budget targets
- Progressive return to normal, with new orders expected in 2020 Q4, which historically has had little impact on yearly revenue, given that subscription income is recognized pro rata.
Beyond this scenario, as a software vendor of 100% SaaS solutions, Sidetrade can count, more than ever, on the robustness of their subscription model to weather the crisis:
- 89% of revenue is recurrent, and based on multi-year contracts (41.1 months, on average).
- A record number of bookings in 2019 (88%, hitting a level of €4.8m in new annual subscriptions from deals signed in 2019) will have a significant positive impact on 2020 revenue growth.
- The very low churn rate in 2019 (3.9%) is expected to continue into 2020, in a setting where cash collection and credit management will be vital issues for all B2B companies.
The firm's prediction of a gradual return to normal in Q4 is interesting. I see much commentary predicting a slow return in Q3 but according to Turner, the company is thinking in terms of September, which is at the end of Q3. Of course much depends on how COVID-19 plays out in each country. In the UK for example, Professor Chris Whitty, Chief Medical Officer (CMO) for England, the UK government’s Chief Medical Adviser and head of the public health profession yesterday publicly stated that some forms of lockdown could continue through to the end of 2020. Other countries will have their own agendas but right now no-one really knows.
I asked Turner how Sidetrade personnel have responded to the sudden switch from office to home working:
The CEO was of the belief that people should work from an office but when COVID-19 came along, we went into a virtual environment pretty much overnight. For us it is operations as usual but of course that's not the case for many customers. It's working out really well. Apart from the work itself which is 100% remote, staff are self-organizing social activities using all the tools you'd expect and seem to be doing just fine but we have to monitor the situation to ensure everyone stays healthy.
Asked whether Sidetrade will return to office-based work, Turner was more circumspect but said:
We were outgrowing some offices but we now think that we can retain existing arrangement by combining with a degree of home working.
How that translates into budget impact is unclear but that is of secondary consideration as Turner thinks this represents an opportunity to reshape business more generally. But equally, he says:
You can see from the information we're showing in the tracker just how important it has become to keep on top of unpaid bills. Here's an interesting case - we could never make much progress talking to utilities because they considered themselves immune by virtue of having direct debits in place. Suddenly, they've found that direct debits are not the protective measure they once were.
On the revenue optimization side, Sidetrade helps customers discover fresh opportunities
Outside of high tech, the idea of having a Chief Revenue Officer is unusual. We think that as business returns, CROs will be much in demand. We see them as working across all departments including marketing, sales, finance and operations. We're finding that customers in many industries don't have visibility into what their customers are buying, the buying patterns and so on. For example, we can help customers determine where they should place discounting campaigns, who they should target for additional services and so on. We have many examples where customers don't know.
Sidetrade is one of those unsung vendors whose services really do help customers and especially in times of crisis but also where opportunities arise. The fact they have brought attention to the speed and severity of the cash crunch is telling. The question for customers experiencing cash issues though is more fundamental - what are you going to do about it?