Cash flow is a critical success factor for any business. We recently conducted survey within our Broker network (Australia and New Zealand) with the aim of learning more about the causes of cash flow stress, how people react, and what measures can be taken to manage it.
Our survey found that 75% of Brokers would recommended invoice or debtor finance as a first step in helping clients improve their cash flow. Invoice finance capitalises on what’s ‘coming into’ the business rather than putting at risk personal collateral, such as property or equipment. This enables businesses to sustain and grow, without taking on more debt.
Some of the other key findings include:
The main reasons businesses feel cash flow stress are – rapid expansion, chasing invoices extended payment terms
Businesses turning over between $500K – $5M are most likely to feel cash flow stress
The most common reactions to cash flow stress include; stopping paying invoices (something that can be damaging to the business long term), panicking (something that will be damaging to both the business and the business owner) and (encouragingly) seeking financial help
To help their clients relieve cash flow stress, 75% of respondents (Brokers) would recommended invoice or debtor finance first to help clients improve their financial situation.
The responses to cash flow stress; stop paying invoices and panic – above seeking financial help, highlights that many business owners may not realise that there are options available to them. Talking to a finance Broker about business issues will certainly be more effective long term than the other two.
In terms of how they do help, the Brokers said that they would conduct a financial review – including receivables, payables and inventory. They would also seek negotiations on contracts that are adding to the problem. Finally, they would look at short term or debtor finance to cover any shortfall, plan for growth and forecast ahead.