FIFO Capital – Getting on top of Cash Flow

ANDREW ALLEN, Head of Operations for FIFO Capital, reports on the challenge of getting on top of cash flow these holidays.

IT’S a very old story and it’s known to every business – some trade debtors are slow payers and more so over the New Year’s holidays. It’s not that they won’t pay. It’s just that for a whole range of reasons, they take longer to put the cheque ‘in the post.’

Ordinarily that’s not too much of an issue. But what if your own cash flow is going through one of those ‘tight’ periods? Or perhaps a particular job has been larger than usual so the amount outstanding is more significant.

Similarly, any business subject to seasonal variation, and certainly every business that has experienced growing pains knows that ‘cash is king,’ and having funds locked up in invoices can be highly frustrating.

WHAT ARE THE OPTIONS?

According to Jaspreet Singh of FIFO Capital, invoice financing is the ideal solution for businesses with working capital stress. Invoice financing refers to the business selling one or more of its current invoices to a third party, which then pays the business a large part of the face value of the invoice. In FIFO Capital’s case, Jaspreet says that’s 80% of the value. Then, when your trade debtor actually settles the account, FIFO Capital remits the balance of 20%, less its fee.

According to Jaspreet the advantages are considerable. “It could be that you want to invest in new plant or equipment, or you simply need a quick fix to meet your own obligations. Rather than having to go to your bank for additional overdraft or other borrowing arrangements that generally require collateral, you simply turn the asset you already have – the invoice, into instant working capital. It’s amazingly quick, painless and efficient. And it’s also becoming a preferred option. In fact, many banks will recommend it because it does not interfere in any way with your existing financing.”

Recently an excavation business needed a one off $35,000 cash injection to pay for equipment and running costs for a large project which they had just won. With only a handful of clients, their next round of invoice payments were a good 30 or so days out – leaving them well short of funds to commence the project.

To quickly improve their cash flow position, the customer selected one of their outstanding invoices valued at approximately $45,500 and ‘sold’ it to FIFO Capital – at which point an advance of $36,400 was provided to the business. The business was then able to pay for equipment and labour allowing them to commence and complete the project without any cash flow disruptions.

In this instance, from first contact FIFO Capital advanced the funds within 24 hours. But Jaspreet says that after that first transaction, one fax or email is all it takes and subsequent invoices can be turned into working capital within 2 hours.

Anyone interested can discuss their requirements with Jaspreet at FIFO Capital on 1300 786 540 or Jaspreet.singh@fifocapital.com

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