Dynamic Business

With debtor finance you no longer need to offer customers a hefty two and a half to five percent discount to encourage prompt or early payment; you don’t need to give away a slice of your profits to improve your cash flow. The money you generate from debtor finance can go towards paying your own suppliers and negotiating a discount for early payment. The result is that not only do you pay less for your supplies, but you can also offset the cost of the debtor finance facility.

However, a common misconception held about debtor finance is the complexity of administering it. Advances in Information Technology have reduced the administrative requirements for debtor financing so all that is generally required is to draw the data from your accounting software such as MYOB or QuickBooks and to upload it onto your financier’s website.

The entire process is almost seamless and has reduced the cost of debtor finance to around half the cost today of a similar facility ten years ago.The basics of putting together a debtor finance package are relatively straightforward. You will need to prove that your business is in a sound financial position and the financier will analyse your debtors’ ledger assessing it for the quality, the aging and the spread of debtors.

In some cases you’ll be able to be selective about those debtors you hand over to the debtor financier, in other cases it will assume all of them.

So, next time you look at your business’ cash flow, ask yourself if there are things that you could do if you had cash in the bank rather than debtors on the books? If there are, then debtor finance might be just the financial tool you’re looking for to get your business over the Christmas cash flow hump.

- Rob Lamers is the CEO of cash flow finance specialist, Oxford Funding (s subsidiary of Bendigo Bank and Adelaide Bank).

People who read this, also liked:
12 tips for a cash happy Christmas