Cash flow & factoring are like peas in a pod
One particular article I noticed was the “to do” list for SME’s this year written by Sue Prestney (MGI Melbourne) from the Institute of Chartered Accountants, not surprisingly she put at the top of her list “O1 CASH FLOW”.
“A business sinks or swims on its cash flow. It is particularity important that small businesses maintain control of their cash flow during difficult times. Try to stay on debtors for payment, in order to keep the cash flow coming in. The best way to ensure this is by keeping in regular contact with your customers and clients and monitor current collections against past payment history. This should alert you to debtors that are experiencing problems. In such a case don’t allow debts to mount – a sale is not worth making if you are not going to get paid. Ensure your invoices carry a ‘retention of title’ clause, so you can at least get the goods back if the debtor fails to pay.”
The article goes on to focus on the point that small businesses need to watch a few key areas in order to survive including inventory management, foreign exchange and banking relationships. However her point about cash flow was at the top spot for a reason and without constant monitoring and contact things can easily push that stress level into the red.
Most businesses are unaware that there are companies that offer all of those services mentioned in the article about collections and debtor follow ups, the stuff that keeps you buried in paper work instead of focusing on what you originally envisioned when you started out. Surrounding yourself with experienced people and outsourcing labours tasks can help you achieve your goals a lot sooner.
The type of company you are looking for in 2009 to help with your cash flow is an invoice factoring company. A factoring company works almost like an outsourced accounts department…only better. Imagine when you raise an invoice you can get that money owing to you today instead of waiting on average up to 55 days to get paid. Imagine not worrying about having to follow up with your debtors for payment, not listening to excuses of missing invoices or the cheque was sent out weeks ago and might be lost. Imagine not having to use a financial tool that doesn’t require you to mortgage your home. Imagine having someone advising you about the credit of you customers, constantly monitoring it for you to minimise any potential losses for your business.
I know it all sounds pretty good, however I know from speaking to new clients every day that the most frustrating thing at the moment is not getting paid on time. A factoring company helps you get the money your owed today and allows you to get rid of at least two frustrations you have right now, getting that money that’s locked up in invoices today and managing your debtor payments.
