Business Management Skills

Many big suppliers to small and medium sized enterprises (SME’s) are finding that their ‘debtor days’ are blowing out in today’s challenging market. The SME’s who purchase their materials are taking longer to cover which ultimately hurts the cash flow on the supplier since they have more effective use of the funds that are tied up in these debtors.

One strategy that the credit teams of these big suppliers are starting to deploy is referring these SME customers to the great things about invoice factoring companies. Factoring refers to the sale and purchase of accounts receivable with regards to accelerating cash flow. The serious reason why it requires to for SMEs to pay their debts and why they need this tactic is that they weren’t paid for the products they delivered or services they’ve rendered. When this job was done for another large company, then the invoice that is generated becomes a valuable asset which can be monetized by financiers who offer factoring.

When the SME business factors their invoice, they can then raise cash that can be used to pay off their account with the big supplier. This helps the SME stick to good terms so that they cancarry on and buy materials on credit terms and of course helps the cash flow and collections of the big supplier.

To make certain that a SME debtor means it when they say they haven’t yet paid their account due to slow paying customers, this strategy can be your approach. If the SME hasn’t then followed up by exploring factoring, then the large supplier knows that there is another reason why they aren’t paying their invoices and can then take the appropriate action according to their credit management strategy.

Managing debtor days is an important Key Performance Indicator (KPI) for credit professionals. In today’s challenging economic environment, credit professionals need all the tools available to help reduce these debtor days and improve the cash flow in their companies.

For more information about factoring companies, call The Interface Financial Group (IFG) at 1300 957 900.

Today’s economic system is quite tight making it tougher for small and medium sized enterprises (SMEs) to secure credit to bank lending facilities. The tightening of credit criteria through the banks has been one rationality why the overall lending to business customers has fallen according to recent data.

However, SME’s who already have a lending facility can find that increasing the level of funding can be challenging which puts them in a challenging situation. On the one hand, they need to find new funding to keep growing their business, but then again they do not want to give up the bank loan they already have. Furthermore, when the bank has a “fixed and floating” charge over all assets of the business, it will likely be challenging to get a new lender to work alongside the bank.

Nevertheless, the debtor factoring industry can work with SME’s in these situations. Factoring companies who offer lines of credit based on the receivables generated through the SME are willing to work together with banks on isolating parts of the security that the bank has and agreeing this collateral is freed up. Banks and factoring companies collaborate all the time on which is often called a ‘deed of priority’ or ‘subordination’ in order to agree with which financier can have certain collateral with the SME in the unfortunate event to a liquidation.

Why would a bank be willing to do this? Mostly because they want the customer to be able to obtain additional capital whilst they cannot provide additional funding to them under their credit guidelines. The business crucially needs the working capital for them to continue growing and operating at a normal rate protecting the bank’s existing lending facilities which have been drawn down. Furthermore, typically the bank would have other forms of security (property, equipment, etc.) that could satisfy their loan balances in the liquidation scenario.

SME’s with bank facilities already in place should consider working with one of Australia’s factoring companies on a debtor facility if their bank can no longer provide them additional credit in the existing facility.

For more info about factoring, call The Interface Financial Group (IFG) at 1300 957 900.

What exactly are your costs for NOT factoring?

Consider the time value of money as well as the benefits of improved cash flow to your business. Paying your suppliers is possible through having cash within 24 hours so you could also receive better discounts as well. Are you able to fulfill your next order to XYZ Company to make payroll without tapping your line of credit at the bank? Can you offer longer terms to larger customers and attract more business? Can improved earnings help your business grow or survive without incurring more debt at the bank? Can the financial benefits of improved cash flow to your business offset the fees of debtor factoring, and then some? Sure it could, the savings alone in taking discounts from your vendors can equal the cost of Factoring. You can keep those other savings! Factoring is a smart business decision. Why aren’t you doing it?

Is cash needed immediately for growth or survival?

Can be your business cash flow stressed having long billing cycles? Despite increasing sales, does the management of receivables and payables appear to be a juggling act? Could your company increase sales by offering better terms to your new and larger customers? Are you spending too much time collecting from slow paying customers and not enough time building your enterprise? Is your bank turning you down for traditional financing on account of years in business, profitability, lack of assets, personal guarantees or financial strength?
Have you contemplated turning away new business due to slow earnings? Debtor factoring is actually a solution made to fix the various challenges many businesses face today.

Great things about Debtor Factoring

Simplicity
The advanced funding you receive for your receivables as well as the discount fees you will pay are based solely on the financial strength and credit worthiness of the customers, not your business!

You receive Cash for your unpaid accounts receivable invoices. Normally the factoring company buys the invoice from you for an amount less than its actual face value (70-90%). When the Factor later collects the full amount of the invoice from your client, you will receive the most of the advance less the factoring fee (discount rate). Fees will vary depending on the total dollar amount you intend to factor monthly.

Flexibility

Are you needing a financial solution flexible enough to support your business to be more competitive while improving supplier discounts, credit rating and money flow? Factor just as much as your want or as little as you want. You decide. No obligations. The amount you can factor are without minimums and maximums. No binding contracts, if that’s what you would like.

Unlike traditional bank financing,debtor factoring depends on the financial strength and credit worthiness of one’s customers, not you. Here’s why you should use debtor factoring services:

Offer Better Terms – Win More Business

With Factoring, you can attract more business offering better terms on your invoices. With factoring, it is possible to negotiate with terms instead of price unlike what most companies does.

To your customers, better terms can be more attractive than better prices.
When you use attractive terms to win business, you can build the price of factoring into your costs of products and services.

Example: A different customer may choose to do business with your company since you can offer NET 30 or NET 45 terms while your competitor (the ones won’t be factoring) requires payment up front but has a 3% better price. It’s possible to leverage factoring services to win the business at no extra cost and improve your cash flow as well like factoring the subsequent invoice at a discount of 3%.

Improve Cash Flow* NO Additional Debt *WIN over customers

Your Business Receives:
* Get cash in 24 hours or less through your outstanding invoices! Eliminate long billing cycles.

* No new debts are created. Factoring is not a loan. This allows you to preserve your financial leverage to take on new debt.

* Improved credit rating.

* Expand your company by purchasing capital equipment.

* Increase inventory for quicker shipments or handle seasonal inventory needs.

* Market for additional business.

* Take trade discounts. This alone can offset Factoring fees and all the other savings are gravy!

* Pay back nagging, expensive delinquent obligations.

* End payroll worries.

* Meet tax requirements by the due date. Forget about penalty fees that are exhausting.

* Negotiate discount purchasing.

* Unlimited sales and potential profit.

If you are looking to receive an increase in cash flow and increase your bottom line profits, you need to use debtor factoring now!

Small to Medium-sized businesses (SMEs) could find it challenging to look for financing in order to develop their business as well about newly established companies that sell on credit terms and would need more capital in due course. What if your credit sales to commercial accounts have created a serious cash flow shortage? Chances are that your company will manage to benefit the most by utilizing commercial factoring services.

Commercial factoring can be described as process where a factoring company purchases your invoices and accounts receivables -then provides your business with an advance payment to your invoices. Known as the third-party, the factoring company basically eliminates the 30, 60 or perhaps 90 day delay in collecting funds.

Many businesses will get payment from the factor less a small discount (around 10%) of the total invoice. Customers that have excellent debt records and who regularly pay their invoices punctually are highly important in using commercial factoring. Factoring has existed for more than 4,000 years, and the reason it works is simply because it enables companies to thrive and grow.

Your business could be on its spot in the limelight when you realize that don’t need to to borrow money from a bank to offer credit terms to customers. What is commercial factoring?It is merely a method used by businesses to convert sales on credit terms for cash flow within 24 to 48 hours.

Commercial factoring has become a preferred financial tool recently, for obtaining flexible capital. As opposed to the seller of the receivables, the customer’s financial strength is the foundation of the receivable credit line.

There are big benefits to commercial factoring including: You will get the cash fast allowing it to apply it to bills, employee paychecks, or supplies. If you have to go into production for one project to make extra money, then you will have enough money you need to begin purchasing supplies with this production. You will not need good credit for factoring services, as a factor relies on the credit of your customers.

You should check out more information on commercial factoring on the web and search for a factor in your region. Using factor will gain an advantage with the factor and grow guided to the next time you require commercial factoring in your business.

“Let him that would move the world, first move himself,” said Socrates more than two millennia ago. A contributing factor for stagnation in our economy could be depicted in this recent survey by Discover Small Business Watch – many business people looking forward to economic indicators to rise before they’re able to spend and hire. But the great news is that the survival rate of new ventures in certain sectors is on the upswing.

Can resource constraints actually be stimulating great business practices today? About 1.4 percent of minority-owned businesses closed down last year, compared with 2.9 percent in 2008. (Source: The Global Entrepreneurship Monitor. )

The small to medium-sized business (SMEs) and their being innovative has enable them to discover ways in surviving on who’ll be first in line hire when revenues pickup after hiring are being stalled. It is all about cash flow, and there is one thing that will help SMEs by their cash flow today. Factoring.

Just what exactly this all means is that if you own a small business, you ought to forget about the negative predictions of recession or the bad unemployment numbers, and have a long close look at your outstanding invoices – probably a banking center of potential – and you’ll observe how you are able to survive gracefully. Once you’ve started employing a factoring company, you will see the way the income you generate now can help your enterprise survive tomorrow.

For over 4000 years and counting, factoring has been utilized. It really works. Factoring is known as a flexible way of business finance, and invoice factoring only advances money to a company as and when it issues new invoices. Just in twenty-four hours’ operation, factoring can arrange facilities that advances payments all the way to 90% of the outstanding invoice value.

Factoring is probably the only financial strategies capable of bridging the space between completing a customer’s order and getting money. As the facility and advances money secured only against the firm’s outstanding invoices (rather than external security as per normal bank borrowing) the total amount that may be advanced will grow directly with any growth sales. The greater trading success and growth a firm enjoys, the more funds could be released to pursue new expansion opportunities with no common earnings problems related to late payments or extend invoice terms.

The small population in Australia, roughly around 22 million people only, is 1 challenge that most businesses in Australia are facing. To be able to be able to compete well in the present global economy, the business must be able to make it as much as a particular scale by generating adequate marketplace share. The recent challenges felt by Australian retailers from the threat of on-line retailers accentuates this challenge.

Moreover, Australian ingenuity is also growing the possibility of making company globally effective. In areas as diverse as solar energy, monetary services, mining and building materials, Australian companies have ventured overseas to carve out growth strategies with outstanding results.

This benefit has never been much more important than in the present environment with the Australian dollar near its strongest historical levels. Even when the Australian items are much more costly for people paying other currencies like US Dollars or Euros, the demand is still high because the quality of these items.

Nevertheless, financing is 1 main challenge that many Australian SME’s have to face particularly when dealing with clients overseas. These challenges consist of the following: 1. Some overseas customers would prefer to be invoiced in their domestic currency; two. Determining if the client has a good credit history 3. If the item has to be shipped, the payment terms may be longer than the ones being implemented in Australia.

Providing a answer to these challenges is really a small, but active group of finance companies who offer international invoice factoring services. Factoring refers to the financing of a business’ invoices as a form of working capital cash flow. Oftentimes, outstanding invoices or accounts receivables are ignored, but these assets can still be used as collateral for a particular type of credit line.

Nonetheless, overseas customers limits the number of companies that are capable of providing this kind of service. Factoring companies that have international branches have the capacity to offer this kind of service with the use of the invoices of international clients to offer the a lot required cash flow increase. Having this presence allows them to conduct the essential due diligence on the debtor and also initiate any collections activities in scenarios where the invoices are not paid.

First, the factoring business can initiate the funds transfer in the currency where the consumer is situated which allows the Australian business to invoice in that currency. Secondly, the factoring business will usually do a credit check on the debtor – thus, if the factoring business won’t finance the invoice, then the small company should most likely not be giving them credit anyway. Last but not the least, the role of factoring is to enable the SME to cater to the payment terms preferred by the client overseas without having to compromise their present cash flow.

Call The Interface Financial Group (IFG) at 1300 957 900, when you have questions or for much more particulars on factoring.