Consistent cash flow is the life blood of any business. You’ve got to keep it coming in because a lack of cash is terminal.
“Quite often you hear that buzz word “cash is King”. The two main killers of any business are if you can’t pay your staff or tax — that’s going to get you into trouble very, very quickly” says Greg Wertheim, General Manager Scottish Pacific.
His company specialises in a fast growing space of lending — otherwise known as invoice finance, or otherwise known as factoring to help businesses grow.
Business banking that’s been around hundreds of years may not be able to help a company if it’s outgrown its current facilities by tapping the approved overdraft facility to the max.
Greg says that invoice finance is a comparatively “new sector” growing in popularity with different security requirements.
“One of the beauties about invoice finance is that we don’t need real estate security, bricks and mortar — we simply take the security against the actual invoices” he says.
Businesses that have a turnover of half a million dollars or more and selling to other businesses are the ideal candidates however funding can be extended for smaller growth-oriented businesses and startups who have commenced trading.
Being unsecured against property, this can allow the owner to minimise their personal risk in uncertain environments, or use it to secure funding for other purposes.
Scottish Pacific establishes a line of credit “freeing up 80% of the invoice straight away” that provides cash flow secured to a business to business transaction such as procured services or goods that have been delivered.
“It’s a flexible, scalable facility giving total peace of mind.”
This approach can be a game changer by setting a business on a growth trajectory up to the next level that they were struggling to achieve otherwise. Additionally, it can provide the owner with certainty around cash flow to give them confidence in their decision making.
As a former Business Development Manager, Operations Manager and now General Manager, Greg is all too familiar with poor commercial habits by SME owners when it comes to cash flow management.
Quite often a business becomes unstuck due to critical tasks, like accounts receivable, invoicing, cash flow forecasting and cash allocations being neglected Greg advises.
“When it comes to debtor management, keep it up to date.”
A common pitfall for SME owners is putting effort into building a brand and generating invoices, yet not getting them paid.
“Do what you love but don’t neglect the housekeeping” he says.
Keeping on top of debtors using invoice finance has other positive impacts, particularly for importers who are in a stronger negotiating position for bigger volume and/or early settlement discounts due to the advantage of having freed up cash.
“It can provide users of invoice finance with a commercial advantage in negotiations too, as cash is ready and available quickly to jump on opportunities”.
You may have a home that’s all tied up owing 90% to the bank with no other security, Greg points out that there may be a nice debtors ledger sitting there unused with potentially hundreds of thousands of dollars or millions that Scottish Pacific can free up to take them to the next level.
“The amount of times I’ve had an owner say to me “if only I knew about this sooner one or two years ago” after obviously doing the hard yards and struggling.”