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Update: The Australian and New Zealand operations of Bibby Financial Services were acquired by Scottish Pacific Business Finance in late 2015 to create Australia’s largest non-bank invoice finance specialist. Welcome to our website.

November 24, 2017

The nightmare before Christmas for many small to medium businesses is the thought of how they’ll pay their BAS at the end of February.

For thousands of SMEs, the lead-up to Christmas can be incredibly busy (see Heritage India Imports case study below). Things then go quiet for up to two months – and while no invoices are being paid in the meantime there are wages, suppliers and other bills that must be honoured. Then, after a period of leaner cash flows, a BAS payment is due.

Scottish Pacific, Australia and New Zealand’s largest specialist provider of working capital to SMEs, traditionally sees a spike in enquiries in November as business owners look at the books and realise they will need assistance with evening out their cash flow.

Wayne Smith, the Head of Debtor Finance at Scottish Pacific, says the post-Christmas quarter can be a challenging time, with the traditional seasonal dip in cash flow making it more difficult to fund growth and to meet outstanding liabilities on time.

With the ATO’s 2015-16 annual report showing small businesses owed almost $13.9 billion in collectible tax debt, Mr Smith encouraged SMEs to avoid running up a tax debt due to Christmas working capital issues.

"It's not uncommon for high growth businesses to end up with an ATO debt because they didn’t have the funding or cash flow support. Often this comes from a lack of awareness of the many small business funding options available, including debtor finance, that don’t require property as security," he said.

6 tips to boost post-Christmas cash flow

1. Speed up your collections cycle. Improving debtor days - the average time taken by customers to pay invoices - can really make a difference to cash flow. An example: a business turning over $110 million and with an average debtor days cycle of 60 days could receive a cashflow boost of more than $135,000 by cutting debtor days down to 55 days. Simple ways to reduce debtor days include: make sure invoices show all the relevant information required by the customer to make payment, send timely payment reminders and put in place a reminder call program.
2. Take deposits on large orders so that you are not having to outlay for large production costs up front.
3. Closely monitor stock - having too much stock on the floor, especially if certain lines aren’t selling, depletes your cash reserves. If a line is a “turkey”, don’t hesitate to sell it off cheaply to turn it in to cash.
4. Negotiate with your suppliers for longer payment terms so you keep cash in your business.
5. Consider discounts for early payment While you might take a small hit with the discounting, the sweet trade off could be a reduction in your borrowing costs.
6. It may be cost-effective to re-structure your borrowings and look at all working capital options. There have never been more viable funding options for SMEs, so it pays to look beyond the traditional bank.

“You can remove the reliance on real estate security by taking out facilities such as debtor and trade finance. With debtor finance, instead of the business owner taking on additional debt the funder offers an advance on money that is already owed to the business,” Mr Smith said.

Trade finance is a working capital tool available to importers - it provides capital to bridge the gap between paying your overseas suppliers upfront and getting paid months later by your customers.”

Heritage India Imports case study

World globes, plush baby toys and nautical gifts – there’s been high demand for them all this Christmas, and Heritage India Imports has 5 20ft containers (plus one 40ft) either already landed or heading to Australia to meet this demand.

The wholesaler has been a Scottish Pacific customer for seven years. This helps them meet the cashflow requirements of a system where they have to pay international suppliers up front but may not be paid by their own customers (national pharmacy and newsagency chains as well as general gift and homeware retailers) for 60-90 days.

Heritage India Imports’ Tamara Dunn said their July to December trade, focused on the lead-up to Christmas, accounts for 65 percent of revenue.

“By October, once we’ve completed trade fairs and customers have put their festive season orders in, we always end up cash-poor. Our money is tied up with the goods in containers, as we pay 30 percent at the time of ordering and 90 days later we pay the balance to take ownership of the goods. All products have to be fully paid for before arriving at sea or air ports into Australia,” according to Tamara.

“This time of year gets stressful. It’s a real shuffle to manage cashflow but debtor finance really helps – it allows us to grow, and to buy new products. Growth is important because as a wholesaler, if you’re static you’re dead.”
Recently Heritage, which is celebrating 24 years in business, added a trade finance facility to their debtor finance line of credit, to support their expansion into a new range of products.

“Scottish Pacific trade finance pays for 90 percent of the import bill, then we have 60 days to pay it off. This allows us to import product (much of which we’ve pre-sold through marketing and trade fairs) and it’s a significant boost to get money in from sales before we physically have to pay for the shipment,” she said.

Scottish Pacific Business Finance is part of the Scottish Pacific Group (ASX:SCO), an ASX300 company. As the largest specialist working capital provider in Australia and New Zealand we help SMEs increase their cashflow and achieve their business aspirations. More than 1700 clients in industries including transport, labour hire, manufacturing, wholesale, import and printing, benefit from our broad range of debtor, selective invoice and trade finance and other solutions to help businesses grow. Scottish Pacific handles more than $15 billion of invoices each year, providing funding exceeding $1 billion. Established in 1988, the business has full service bases in Sydney, Melbourne, Perth, Brisbane, Adelaide, Auckland, London and China. Scottish Pacific was named Australia-Pacific’s Best Business Finance Provider in the 2017 International Trade Awards.

For more information, or to interview Wayne Smith or Heritage India Imports, contact:
Kathryn Britt
Cicero Communications
Tel: 0414 661 616

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