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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.

scottish cashMost business owners and advisers equate finance with cost. Unless it is intended to generate additional revenue, finance means interest cost which cuts margins and reduces overall profitability. But what if there was a funding solution that could actually save, or make, money for a business? This is where a cash-flow finance facility enters the picture. Used judiciously, cash flow finance can significantly improve the cash flow and buying power of a business to deliver significant savings and additional profits which can even partially, if not completely, offset the cost of the funding. One of the most common forms of cash flow finance is called debtor finance or invoice finance, which provides a business quick access (usually within 24-48 hours) to up to 80% of the cash it is owed from its credit customers. The remaining 20% is returned to the client when the client’s customers pay the invoice, and the facility is almost always not secured against real estate which makes it a very accessible and versatile form of funding. Debtor Finance, like all cash flow finance, can help streamline a business’ operations and deliver it much more significant buying power. Here are a few ways the power of debtor finance can be put to use:

Bulk bargains and early settlement discounts
The rationale behind cash flow finance is to give businesses quick access to cash. Waiting many weeks, or months, to get access to funds from accounts receivable before you can put it to work is a thing of the past. This, in turn, improves buying power and lets business operators benefit from bulk discounts on the products or supplies it needs to drive revenue and growth. If fire-sale prices suddenly emerge, the business can respond quickly and capture margin. There’s nothing more frustrating than seeing discounts but not having the cash in hand to act. Better margins are one of the other flow-on effects, all of which can be used to save money and offset the cost of financing.

In many cases, the loan to value ration of debtor finance is higher than many alternative forms of lending, and considering that for many SMEs their receivables are their largest balance sheet asset, debtor finance can provide access to significantly more funding to use as required.

Lock it in
Fluctuating currencies rates can seriously hurt the profitability of a business. So it makes sense for importers and exporters to lock in favourable exchange rates for future transfers. Again, however, a lack of readily available cash prevents many businesses from taking advantage of such a simple strategy, leaving them at the mercy of volatile money markets. Debtor finance can empower businesses in this area, and an additional benefit is that it also often negates the need for early settlement discounts for customers.

Go for growth
Opportunity cost may not appear in your accounts, but they are a very real factor for many business owners. An ability to take on more contracts, target a wider market or even acquire a competitor can be missed if cash-flow is poor. With the peace of mind of debtor finance, owners can quickly access most of the money owed through their outstanding invoices and pursue sales and growth opportunities which their cash flow prohibited them access to. In this way, being able to make that additional sale can and should result in additional profit.

Streamline accounts receivable
Managing accounts receivable and credit is critical. It is also costly in terms of time and money. Even a well run AR function will involve at least a full or part time wage, the cost of credit reporting, postage, telephony or emailing costs, software subscriptions and more. The chance to cut the cost of a costly accounts receivable function is often neglected by businesses. Handing it over to an experienced debtor finance team lets owners benefit from best-practice techniques of a proven business finance facility, in many cases improve debt turn and ensure that debtors pay more promptly. This has the double effect of cutting internal costs and boosting cash-flow.

Time well spent
You have no doubt heard the saying about the importance of working on the business, rather than in the business. Cliché or not, it’s an important message for business owners. Your time is not free, it is valuable. The less time you spend on cash-flow and supplier management and the more you focus on effective short and long-term growth strategies, the better. The beauty of debtor finance is that it can free you from focussing on managing cash flow to concentrate on the areas that attracted you to the enterprise in the first place.

All of these factors can make a big difference to the financial success of your business. While some may baulk at the cost of implementing a cash flow finance solution, it is important to consider the holistic value of the funding and the service provided, what it can enable your business to do and achieve, how it might give your business a competitive advantage and most importantly the bottom-line benefits it delivers.

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