GoMaterials had the chance at a big break: after selling their landscaping materials mainly to residential customers, they had the opportunity to take on a big US commercial customer. In theory, this is every business owner’s dream—the chance to grow their company internationally, access new markets, and take on coveted commercial and government contracts.
However, the reality of growth is very different. Before companies can handle bigger orders, they need supplies. And before they can get supplies, they need cash flow to purchase supplies. And even if that cash flow doesn’t materialize, they still need to pay for all those supplies—likely before they’re paid by their customers.
GoMaterials decided to take a leap, agree to a contract with the new client, and then figure out the details. There were a few aspects that made this even more challenging. GoMaterials is a Canadian company and had only been working in the US for a few months before this opportunity came up. They had been working on COD (cash on delivery) terms only. They didn’t have a US corporation registered or any US financial connections. And, although Canadian banks do provide US dollar lines of credit, GoMaterials wasn’t set up for this.
“In order to pursue those bigger customers, GoMaterials needed to offer net terms”
Plus, this wasn’t the type of customer who worked on COD terms. They were a big organization and only worked on net terms. If GoMaterials couldn’t offer net terms in the right currency for this new customer, they’d lose the contract.
Traditional methods of offering net terms have serious flaws, but many SMBs accept this as the status quo. They rely on lengthy customer credit checks that sometimes take weeks to finalize. Their process for finding out which businesses are credit-worthy (floating net terms is inherently risky) is often shaky. Old school credit checks required extensive time and effort from their customers. Some businesses skip this process and offer net terms based on gut and intuition alone. Others offer net terms after an extensive credit checking process, only to end up with overdue accounts receivables from those same customers.
The next ‘best’ solution was usually invoice factoring—selling invoices to a third-party factoring company that would offer a set percentage of the invoice as a cash payout, while keeping the business on the hook for any unpaid invoices. However, factoring isn’t good for a company’s reputation or customer relationships.
Resolve offers quick and unobtrusive ‘quiet’ credit checks that are often completed in mere hours. And Resolve solves for cash flow by providing upfront advances for net terms invoices, paid out within one day. Resolve was able to quickly work with GoMaterials to set up the net terms they needed to offer their new customer.
When GoMaterials was working with residential customers, getting paid wasn’t an issue. Their smaller customers got paid upfront from their customers, and they paid GoMaterials upon delivery. While this created a comfortable cash flow cycle, there was a limit to how far GoMaterials could grow with residential, and they were fast reaching that limit.
The solution was to look at larger contracts with commercial, city, or government projects. But those contractors weren’t going to pay a $40,000 invoice while waiting on receiving their own payment of $160,000. In order to pursue those bigger customers, GoMaterials needed to offer net terms. They needed to be able to offer 30, 60, or 90-day net terms. Big businesses just won’t do business without this.
"We got lucky that Resolve showed up, we would have had to turn down the order."
Again, Resolve was the answer. With every customer GoMaterials wants to offer net terms to, they use Resolve to evaluate the customer’s credit and determine the credit line. With this information, GoMaterials now competes in a much bigger market where net terms are a necessity while relying on Resolve to facilitate cash flow through their 1-day 90% advance payment of the invoices. GoMaterials continues to be in complete control over which customers they choose to partner with Resolve, and whether to extend the full net terms that Resolve recommends.
For GoMaterials, the numbers reveal what a difference Resolve has made. In April 2019, Go Material’s annual US sales were around $100,000. The next fiscal year they were over a million. And they’re looking to double that in the coming year.
$100,000 to $1Million in sales
Of course, Resolve doesn’t take all the credit. GoMaterials is an ambitious company providing quality goods and excellent customer service. They’re working hard to build their business and consistently outperform themselves. But competing with large commercial and government contracts requires excellent net terms. Without those terms, companies won’t even consider doing business. Resolve ensures that even smaller B2B companies can extend the net terms needed to seal the deal—while providing the cash these companies need to keep growing their business and serving their customers.
One fascinating advantage that GoMaterials shared with us was the change in their relationship with their suppliers after they began working with Resolve. We all know that suppliers love getting paid as soon as possible. And most businesses have struggled during start-up and lean times to get any sort of credit/net terms extended. Without supplies, it’s pretty much impossible to run a business, let alone look at growth and expansion. Many businesses were in a similar position as GoMaterials’ customers, using their credit cards as a funding source to pay for supplies.
But when a business receives up to 90% of accounts receivables one day after issuing invoices—and knows they can trust Resolve to consistently provide this financing—their whole financial situation changes. GoMaterials is now in a position where they can negotiate better terms with their suppliers. They know when they’re getting paid from their own clients through Resolve which empowers the purchasing process.
GoMaterials needed a company that could work with them and their US clients. They needed a solution that wasn’t factoring, and wouldn’t ultimately place them in a more challenging financial situation. What began as a single contract to provide digital net terms for their first large US client has turned into much more. GoMaterials now uses Resolve’s ‘quiet’ credit checking to speed up the process of offering their customers net terms.
With payment of a portion of that invoice in their bank account within one day, GoMaterials was then able to expand their network of suppliers into the US. And they didn’t need to spend weeks on the phone and in appointments with their bank, trying to secure a line of credit or other financing! As GoMaterials has expanded their supplier network, they’ve also substantially expanded their customer base, both in the number of customers they’re adding and in the size of the contracts they’re closing.