Cash Flow Stress can seriously hinder the performance of a business
“Super efficient cash flow” implies cash-in at an accelerated pace and cash-out at a snail’s pace - every business man’s dream!
In practice, businesses generally have an Aged Receivable ledger – meaning, there is a prolonged waiting period after the sales transaction before cash flows in.
If your business is paid slowly on a continual basis, it will hinder business performance and restrict your ability to attend to the running costs of the business. Maintaining day-to-day trade becomes a financial headache. This is where the business becomes Cash Flow Stressed, resulting in agitated suppliers asking for payment and landlords sending reminder emails due to late payment.
Traditionally, funding to cope with such-like situations would mean resorting to bank overdrafts - typically secured by the property of owners / directors.
There are alternative funding strategies aligned to the need of a business which can be considered:
Creditor Finance: Creditor Finance is a smart alternative for cash flow funding. Creditor Finance settles payment of suppliers / rent / bills efficiently by means of a finance facility. This facility frees up the business owner to focus on other business operations including recouping of Receivables. In most cases Creditor Finance will be unsecured.
Debtor Finance: Also referred to as "Invoice Funding", “Invoice Discounting” or “Factoring”. With this facility you are financing the waiting period between raising an Invoice and receiving payment for the invoice. Debtor Finance allows accelerated access to cash and facilitates speedy funding of running costs for the business. Debtor Finance is usually secured against the debtors of the business.
Become aware of the various options and strategies available to your business.
In order to accurately assess your business needs, seek Cash Flow Financing advice and be guided through the process.
For more articles relating to this topic visit www.hudsongrayfinance.com.au
Article by Neill van der Walt, Hudson Gray Financial Services 1300 761 474
www.hudsonGRAY.com 1300 761 474