Working with Standard Chartered, Microsoft has developed a non-recourse receivables financing solution where payment terms can be extended to 210 days on a fully disclosed transaction.
Photo of Henry Byrne, Microsoft, Eric Standing, Standard Chartered and Neil Doyle, Microsoft.
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Facilitating sales in difficult times
With many African economies depending on exports, the slowdown in the economies of their major trading partners like China has hit hard, with many governments struggling with current account deficits. These economic headwinds impact Microsoft’s sales directly and see its clients requesting longer payments terms.
However, as the company has seen in other regions such as the Middle East, in times of crisis, government agencies often look towards technology in an effort to streamline processes and become more productive. This then provides a great opportunity for Microsoft to grow in the region.
Microsoft therefore set about developing a short-term financing solution to offer its end customers a longer period to process payments so that its customers do not hit their credit threshold, which impacts Microsoft’s ability to seek additional sales.
Working with Standard Chartered, Microsoft has developed a non-recourse receivables financing solution where payment terms can be extended to 210 days on a fully disclosed transaction. This was finalised in June 2016.
Before Microsoft could begin rolling out the solution, however, it had to work with Standard Chartered to put together an approved list of clients that it could roll US$30+ of short-term financing to. With this shortlist, the Microsoft sales team and credit services organisation are now working through their deal flow to provide financing options to help expand their sales opportunities and also reduce their credit exposures.
“For Microsoft Treasury winning this award is a testament to the ‘Customer Obsessed’ approach that the company has adopted. The Adam Smith Awards have Industry wide recognition and for the structured finance team it is an honor to receive this award.”
The first test transaction took place in March 2017 with a Microsoft reseller customer in South Africa. The feedback was positive, with both the funding and speed of execution praised by the customer.
At present, various other sales deals in Africa are being pursued by Microsoft, where financing will play a significant role and the ROI of the project is clear for all to see. What is more, both Microsoft and Standard Chartered feel that this programme can be grown and replicated across multiple markets.
Best practice and innovation
This solution demonstrates Microsoft’s ability to deal with adverse circumstances in a very challenging geography like Africa. It also highlights its ability to work with banks to develop financing solutions that can be scaled across multiple countries to accelerate growth, become a competitive advantage for Microsoft sales and at the same time protect the company from credit exposures in high risk countries.
Microsoft and Standard Chartered have been able to leverage their global relationship to provide much required credit risk solutions. By establishing limits of 30+M$ with Standard Chartered alone, the solution shows its unique capabilities where it leverages traditional financing concepts but then operationally delivers a seamless experience in financing software with minimal documentation.
“Microsoft as a company has adopted a Growth Mindset culture and using this approach, various teams within the company collaborated to execute this solution. For Microsoft to be selected over its peer groups is a recognition from Adam Smith Awards for the innovation and high impact that our solution brings to the business and the structured finance team is delighted to accept this esteemed award on their behalf.”
Microsoft has focused on understanding customers’ challenges and provided a solution to support their budgets and cash payment cycle with payment deferral options using short-term financing solutions originated and managed by Microsoft.
The execution by Standard Chartered of the first transaction in South Africa within weeks of identifying the need, provides a good example of how quickly this model can be deployed across new customers. Microsoft’s ability to use a cross-functional team to execute reflects its culture of innovation and focus on succeeding with customers.
Key learning points
Finding financing solutions in Africa helps provide options for Microsoft to expand sales to its customers. The learnings from this project were also that:
The solutions require a cross functional unit to come together for a common objective.
Due to multiple risk elements in Africa, structuring the solution and then effective communication with the customer is key to success.
Senior Manager – Structured Finance
As Senior Manager – Structured Finance for Microsoft, Rahul Daswani has responsibility for leading structured finance in India, the Middle East and Africa. He has more than 15 years’ experience in banking and treasury across varied fields including supply chain finance, regional treasury management (Asia and Africa), and credit risk management, six sigma quality and process management. He is a qualified Chartered Accountant and is an Associate Member of the UK’s Association of Corporate Treasurers.