With 2011 around the corner maybe it’s time to think about such mundane matters as cash flow. You know, the dosh on which the future of your business depends. If the readies aren’t as ready as you’d like them to be, why not consider (as many of you do) invoice discounting. It isn’t just a good funding option for businesses that are facing cash flow problems, it’s also a valid way of financing growth.
Whatever stage your business is at, invoice discounting could be a flexible and competitively priced option for you. That said, it won’t work for businesses with stagnant or declining sales, that arn’t profitable or that have a large portion of sales with one large customer.
Not that big equals prompt. D&B research shows big business is the worst payer, taking an average of 62.7 days to cough up. Factoring and invoice discounting can, therefore, help your business leverage its sales to generate the capital you need to grow. It provides a steady and flexible source of funds and utilises that asset that may be your business’s most valuable – your debtors (something often ignored by the bank).
Most factoring companies are willing to ‘buy’ your invoices, but how do you know which one is right for your business? When making the most of invoice factoring, consider which industries have accounts receivable factoring geared especially for their specific business sector and look for a website where you can get a free quote on invoice financing.
One other tip, which I hope you have already put into practice: before taking on any new customer, ensure credit checking processes are in order. You must be prepared to turn potential customers away, however attractive their business may seem. The loss of a sale is much more manageable than a persistently late payer who negatively affects cash flow and spreads resources thin. Happy (cash flow) New Year.
Henry Mendelson has decades of experience in advertising, and has long been a keen observer of the printing industry.
Comment below to have your say on this story.
If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.
Sign up to the Sprinter newsletter