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How to reduce your credit risk
14-10-2019 | Marco Lassche |
It is nice to sell your products at a good price. But what if you have delivered goods to your customer, and he is not able to pay? In this article we give you over 15 options, how to reduce your credit risk.
In this article we give you guidance, how to control and cover your credit risk. We focus on the sales perspective, however it is also applicable on the purchases side; a prepayment to a supplier causes also credit risk.
Ways to control your credit risk:
– Direct Collection
– Letter of Credit (LC)In a direct collection as well as in a LC you handover agreed documents to the bank. The biggest difference between direct collection and Letter of Credit: In a collection the bank pays you only, when the customer paid to the bank. In an LC the bank of the buyer pays you when the agreed documents are delivered by the seller. So for goods that are not easily sold to another counterparty, we would advise to go for a LC.Other options
The warehouse releases the goods to the buyer, when they received the payment, and forward the payment to the seller.
When your sold goods are transported by sea, you can give the release to the shipper to handover the Bill of Lading (property document) to the buyer. Normally this is done after payment of the buyer.
As said, running a business hardly goes without credit risk, but there are a lot of tools that can help you to limit it to an extent that is acceptable.
Please feel free to contact me if you need any further information or assistance in setting up a framework to control your credit risk.
Marco Lassche
Founder and Owner of at Bedrijfskostenexpert
Treasurer and Project Manager at Van Caem Klerks Group
treasuryXL Ambassador
What is Treasury? By Marco Lassche
10-10-2019 | Marco Lassche | Kendra Keydeniers
What is treasury?
Have you ever asked yourself the question, “what is Treasury?”. Many people will think about pirates and big see ships that sank deep into the bottom of the ocean including their ‘treasure’. A mystery treasure map will lead the finder to a treasure worth a lot of money. In some way Treasury and Treasure have definitely similarities, it is about money and other valuables.
Find out what Treasury is……
Treasury
Treasury or Treasury Management is the task to manage the firm’s liquidity and mitigate its financial and operational risk, with the goal to safeguard an organizations’ holdings. Let’s make this more specific. In each organization treasury tasks exist, regardless if the organization is big/small, profit/non-profit, nationally operating/ multinational. Although entrepreneurship is always bearing risk, this should be limited to a certain extent in order not to jeopardize the survival of the company. For each company this is different. For a company like Apple with a net profit margin > 20% losing 4% on its FX exposure has a much smaller impact on profitability, than for a WallMart with a net profit margin of 2-3%. In small organizations treasury is mostly done by the CFO or finance department. Bigger organizations have their own treasury departments, controlled by the CFO. In general, the bigger and more international the organization operates, the bigger and more complicated the tasks of treasury get.
3 main Treasury Categories of Tasks
Treasury management, can be divided in 3 main task categories.
a. This is mostly the day-to-day operations. Make sure that payments that are due are being paid in time to the correct account.
b. Manage your bank accounts in an effective and efficient way
Although the basic tasks for treasury remain the same over time, the content of the tasks evolves over time. Due to external factors like technology, regulations or new financial products, some tasks are less time consuming nowadays then they were in the past.
The future treasurer
A treasurer is someone who manages and oversees the treasury side of financial management of an organization. Tasks like bank selection, reconciling bank statements and managing cash flow are typical for a treasurer.
Payments these days can be automatized to a high extent, a TMS (treasury management system) can help the treasurer. However risks in cyber fraud are increasing. Also increased regulations by banks and/or government take more time of the treasurer. In the past a treasurer only went to his own bank for financing, these days there are many other options for financing or reducing financial risks. It is the task fort the treasurer to keep up-to-date with developments, and to be the consultant for the organization on treasury related subjects.
TreasuryXL.com will help you with this by following the latest trends on all aspects of treasury.
Marco Lassche
Founder and Owner of at Bedrijfskostenexpert
Treasurer and Project Manager at Van Caem Klerks Group
treasuryXL Ambassador
Our banks are not like theirs (if they even have one)
| 08-10-2019 | by Pieter de Kiewit |
Recently Bloomberg reported about the authorities in Indonesia closing down 826 Fintech startups. My first assumption was this has to do with tax evasion and a very controlling government. Indonesia is most definitely not my field of expertise. Reading the article it struck me that my mindset concerning banking is quite limited and restricted to western standards. And over time I have noticed that I am not the only one. Reason to browse the internet, tell you about my findings and issues this concerning.
Even European banks are not all the same
In The Netherlands the retail banking standard was: banking services are for free and you get a decent percentage on your savings. Furthermore cheques were left in the previous millennium and even my grandmother uses on-line banking. Italian retail banking already came with an invoice long ago and cheques were and still are a standard in Germany. As many Europeans have no regular access to the (mobile) internet, banking on their computer or phone is not an option. One can also take this from the average number of banking offices to be seen in the streets of Amsterdam versus the ones in Bucharest.
Banking differences in the rest of the world
I did not do a comprehensive study but do know that for many of us Europeans a personal credit rating does not very sound familiar. When I lived in Canada I learned that you need a personal credit to get a cheque book. You get your credit rating by having an account where a regular income lands and improve it by leasing a car and pay your credit card bills in time. Without a credit rating no mortgage, a better credit rating results in a lower interest rate.
In some African countries telephone landlines were never installed and the first regular telephone was a cell phone. In parallel, bank accounts were skipped and cash is replaced by credit on this same cell phone. I think all these systems are doing a more or less proper job. Only if you want to cross the border you will need to help.
Problems with inadequate banking services
EY reports that over 200 million SMEs do not have access to banking services putting them in an offside position in the global economy. All this because the regular big banks want to deal with them as if they are a Western company. The Bloomberg article describes a situation where 90% of the Indonesian population has no credit card or access to banking services. Of course this is a facilitator for the black market economy. But also, there are examples where Fintech and loansharking are being combined with all related criminal behaviour and excessive interest rates. And, in a society without banks, what can you do with your savings? I think these are real issues.
Having browsed and learned I don’t think we should aim for a worldwide standard in banking. I hope we can learn from each other and that the banking landscape will be more honest, enabling a fair global economy. With this in mind I think I will have another look at cryptocurrencies introduced by Facebook and other new kids on the block. That is for another blog and by now I think I understand the Indonesian government better.
What are your thoughts and which interesting examples do you see around the world?
Pieter de Kiewit
Owner Treasurer Search