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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.

Scotpac winIt’s no secret that cash-flow – or a lack of it – is a killer for many small and medium-sized enterprises. Less well known is the fact that various market solutions exist which can help businesses better manage this issue and even get a competitive edge over their rivals.

When cash flows the business has a pool of working capital to fund its operations. Being able to improve the rate of cash flow: increases the funding available to the business; increasing its buying power to seize early settlement discounts or bulk discounts at favourable discounts; enabling it to improve its supplier relationships, spend less time and cost managing cash flow and provide the funding to increase sales and revenue.

Taken together, these advantages put these businesses on a significantly better competitive footing which open up even more growth opportunities and potentially acquisitions. In fact, cash flow can be a strategic secret weapon if it can be controlled. However, it is of course very often difficult to achieve.

Debtor finance is a unique solution which can provide such control over cash flow. It is essentially a line of credit linked to and secured by a business’s outstanding accounts receivable. There’s no need for real estate security and no capital repayment requirements. The business will have access to the cash in their credit sales upfront, to put back to work to seize opportunities, meeting running costs, pay down debts, increase stock orders or steadily increase orders. What this means is the business is free of many of the constraints that businesses without such cash flow strength often face.

Here are some ways debtor finance can help you outshine your competitors and achieve sustainable competitive advantage.

Improve your debt turn
Payments in arrears – even if it’s by just a matter of days – can have a serious impact on a business’s ability to inject cash into sales initiatives and grow profitability. For example, for a business turning over $10 million a year (and assuming a rate of interest of 10 per cent per annum) a three-day increase to debt turn will equate to almost an $8000 jump in interest costs that must be funded. For many SMEs, this may lead to them having to shut their doors. A credit control function provided through a debtor finance solution can cut this risk and realise significant savings, allowing funds to be used for value-driving activities.

Get quick access to money
Agility is a buzzword in modern business, and with good reason. The ability to quickly respond to market opportunities, such as acquiring a competitor, delivering a project, or pursuing a lucrative export contract, is crucial if you want to outflank peers in your sector. In a typical debtor finance scenario, a business can get 80 per cent of the value of approved invoices, less the finance company’s fees, within 24 hours. This allows a business to put cash into growth opportunities, while the other 20 per cent of the invoice becomes available when the invoice is paid in full.

Cut your accounts receivable costs
An efficient and dedicated receivables function is important for all businesses – and it is often hard to fund internally for smaller entities, in particular. Handing it over to expert debtor financiers allows owners to benefit from best-practice techniques, improve debt turn and ensure that debtors pay more promptly. In short, you get more a cost-effective receivables function and greater peace of mind. With most other businesses neglecting the opportunity to better manage this accounting function, such a move can give your business the capacity to engage in service and supplier improvements, plus other upgrades, that your competitors cannot afford or need more time to deliver.

Benefit from cash-flow confidence
There is little doubt that the security of superior cash flow can improve a business owner’s decision-making and facilitate longer-term strategic decisions. Additionally, with the stronger cash flow and increased funding through debtor finance, growth can be fast-tracked and economies of scale achieved. This can, in turn, appreciably improve margins and extend your capacity to take on more business. Economies often come with scale so driving revenue using stronger cash flow can improve your competitive position.

Shore up customer trust
An appropriate debtor finance facility helps a business retain customers on attractive terms. Clients will appreciate the greater stability of your operations and be more likely to give you contracts. What’s more, fast access to funds often means a business can take on new business while a competitor is bogged down waiting months for payments.

Invest in innovation
R&D and innovation is often at the core of success for businesses as they pursue new market opportunities and seek an advantage over slower-moving rivals. This takes cash. Stronger cash flows enable an enterprise to set aside a percentage of revenue for new initiatives that can assist long-term growth.

Sharpen your focus
In a similar vein to innovation strategies, modern businesses need to constantly be on the lookout for measures that can improve their customer service and pursue value-driving and growth-conducive products. Having cash readily at hand allows greater focus on such initiatives and can act as a genuine strategic weapon as you seek to excel in your chosen market.

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