Make Cash the King in your Business

Paul Ryan | December 29, 2016

The most challenging aspect of owning a business is being able to generate the cashflow to keep the doors open. The phrase “Cash is King” is a simple reminder for business owners to be making the money to cover expenses, wages, a rainy day and meet their profit expectations.

Limited cashflow will stifle the growth of any business and test the patience, resilience, and confidence of any business owner.

So many businesses have fought the good fight, found a way and then had to endure the breakdown of important equipment or a customer not paying their invoice on time. It’s enough to create a bout of indigestion for the business owner and managers.

So how can a business mitigate against such risks and what options are available to maintain business momentum?

Similar to the disruption they played in home loan lending, the non-bank sector has become a welcome alternative for business owners to seek finance options outside of the major banks.

For many years, business finance was the domain of the banks and business owners and their business was at the mercy of the banks and management decisions.

Business Finance, Equipment and Leasing Finance, Asset Finance, Debtor Finance, Invoice Finance, Sale on Leaseback, Agribusiness are not necessarily new terms to the world of finance but the Non-Bank sector has applied their own discretion in the type of lending, products and services they are prepared to offer finance.

Let’s have a look at some of the opportunities for business finance.

Equipment Finance – the ability to lease, hire purchase equipment such as motor vehicles, tractors, machinery has been around for many years. However, you would be surprised how far the equipment finance extends to these days.

Many business owners are looking to save money on their energy costs and looking for an energy efficient upgrade. There are now leasing options available that include solar, lighting and even light bulbs that you can finance or rent over a couple of years on monthly payments that help preserve your cashflow.

Other examples of what you can obtain equipment finance for include; air conditioning units, office fit outs, digital point of sales equipment, laptops, audio visual equipment just to name a few.

Invoice Finance – invoice finance comes in many forms and can include debtor finance, invoice finance or trade finance.

This type of finance allows a business owner to receive a percentage of their outstanding invoices upfront so that they can manage their cashflow, continue to grow and not have to wait 30,60 or 90 days for their client to make the full payment.
Let’s say, you purchase your goods for say 50,000 and have sales to retail outlets totaling $120,000 with varying terms between 60 and 90%.

Having to wait for the retails outlets to pay their invoices may cause problems for your cash flow in that you then can’t afford to fund the next purchase and continue to grow.

The key to preserving cashflow is to understand the available finance options and tax implications to your business. It’s about asking the questions to help your business prosper

Please also seek advice from your accountant, finance adviser, finance and mortgage broker to ensure the finance is structured appropriately.